“It’s been a while since we had a European sovereign debt crisis,” wrote ZeroHedge on Thursday.
Something is going on in France, where that country’s 10-year government bond (OAT) yield is up another eight basis points today, even as the German 10-year Bund yield is lower by six basis points.
That’s widened the spread between German and French 10-year paper to 135 basis points, with credit default swap (CDS) spreads on French bonds soaring to a 13-year high.
For perspective, the 10-year Bund/OAT spread has been mostly in a range of about 50-80 basis points over the past few years.
The euro is quickly losing ground versus the greenback, down another 0.9% today to $1.1231, its weakest level in about five months.
It’s a well-known axiom that central banks tighten monetary policy until something breaks, and that could be happening across the pond.
Traders continue to quickly abandon bets on another imminent Fed rate hike. The 2-year U.S. Treasury yield is down 7.5 basis points on Thursday to 4.81%, with the odds of a Fed move in October shrinking to 33.8% after sitting at about 70% earlier this week.
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