Europe’s bond vigilantes are wreaking further havoc in the markets today, with the weak and vulnerable sovereigns being castigated mercilessly at the expense of the fiscally responsible. In general terms, it is the bond markets of those electorates rebelling against austerity that are taking a beating. Spain is being singled out for particularly harsh punishment, the 10yr yield climbing 30bp to around 6.25% and 5yr CDS at a record high of 540bp. Italy is also being spanked, the 10yr yield 25bp higher at 5.75% with the spread to Bunds wider by 35bp. French, Portuguese and Greek bonds are also being whipped.
In contrast, 10yr bond yields in Germany, the UK, Sweden, Switzerland, Finland and the Netherlands have all registered record lows today. The 5yr Bund is yielding just 0.5%, while the 10yr Gilt yield is now almost 100bp below comparable French yields.