Peripheral bond spreads have rallied for 10 of the last 11 days. At a mere 269bps, Spanish bond spreads are the lowest in 2 years; Italian spreads (at 240bps) are the lowest since July 2011, and even Portugues bond spreads compressed 15bps today to near 2-month-lows. Since mid-July, it is clear that hot-money flows are charging into peripheral European bonds and not into US equities. European stocks (mostnotably the worst economically) have also risen (Greece +21%, Spain/Italy/Portugal +11.5%) but most recently it is the bonds that have seen the major flows.
The Great Rotation...
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as Bond spreads in Europe collapse...
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The Dash for Trash moves to Europe...
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It all makes sense somehow... 10Y Italian debt is now only 45bps 'riskier' than 30Y US debt...
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Charts: Bloomberg