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Spanish bonds at 7.062
Jul. 9th, 2012 10:50 amInterest on Spanish ten-year bonds is at 7.062 as of 10:00 AM my time (noon Eastern Daylight Time). People who seem to know a lot more than I do think rates this high are a big deal, and a sign of danger. (High interest rates on bonds mean that the Spanish government has to pay a lot to borrow, right?)
Explanations for the high rates tend to be some or all of the following: (1) Investors think the equivalent of a bank run is possible, the run being on the Spanish government rather than a bank; in any event, they consider the investment a high risk, so they want to get high returns if the risk pays off. (Runs don't have to be rational, or based on fundamental problems of solvency. All they need is for investors to fear that other investors are about to start calling in their debts, and for them to know or fear that no entity is prepared to back up the bank or country that's getting run on.) (2) Indications that the recent deal to bail out Spanish banks doesn't have full EU support. (3) Indications that the Spanish gov't will be forced to guarantee the bailout after all, so that the bailout will add to government debt (officials are busy denying this). (4) The deal, while significant in regard to the European banking structure, was too little too late to help Spain and Italy, which still have no credible path to prosperity as long as they're in the Euro-zone and central Europe refuses to do anything to stimulate the economy (ECB lowering rates as little or less than expected reinforces this feeling). (5) Deal will take too long to implement (almost six months). (6) Deal wasn't enough to overcome sense that ECB and the European government are fundamentally frozen in the headlights. (7) At this point, anything is too late, the missiles are launched, the armies are mobilized, the asteroid is on path to hit, the sky is plummeting, Humpty Dumpty has left the wall. (7) Other stuff I forgot or don't know about.
( Colorado will furnish Christmas tree for U.S. Capitol in 2012 )
Bloomberg's ongoing updates of SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE are here:
http://www.bloomberg.com/quote/GSPG10YR:IND/chart
Explanations for the high rates tend to be some or all of the following: (1) Investors think the equivalent of a bank run is possible, the run being on the Spanish government rather than a bank; in any event, they consider the investment a high risk, so they want to get high returns if the risk pays off. (Runs don't have to be rational, or based on fundamental problems of solvency. All they need is for investors to fear that other investors are about to start calling in their debts, and for them to know or fear that no entity is prepared to back up the bank or country that's getting run on.) (2) Indications that the recent deal to bail out Spanish banks doesn't have full EU support. (3) Indications that the Spanish gov't will be forced to guarantee the bailout after all, so that the bailout will add to government debt (officials are busy denying this). (4) The deal, while significant in regard to the European banking structure, was too little too late to help Spain and Italy, which still have no credible path to prosperity as long as they're in the Euro-zone and central Europe refuses to do anything to stimulate the economy (ECB lowering rates as little or less than expected reinforces this feeling). (5) Deal will take too long to implement (almost six months). (6) Deal wasn't enough to overcome sense that ECB and the European government are fundamentally frozen in the headlights. (7) At this point, anything is too late, the missiles are launched, the armies are mobilized, the asteroid is on path to hit, the sky is plummeting, Humpty Dumpty has left the wall. (7) Other stuff I forgot or don't know about.
( Colorado will furnish Christmas tree for U.S. Capitol in 2012 )
Bloomberg's ongoing updates of SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE are here:
http://www.bloomberg.com/quote/GSPG10YR:IND/chart
