Bond markets are entirely rational. They form a major component of every MPC presentation and decision.I therefore look at the developments since the start of the week and give the relevant figures below.
Friday 8th July Monday 11th July Friday 15th July
Greece 17.04% (14.20) 17.19% (14.52) 17.71% (15.02)
Ireland 13.13% (10.29) 13.62% (10.96) 14.27% (11.58)
Portugal 13.05% (10.21) 13.28% (10.61) 12.93% (10.24)
Spain 5.69% (2.85) 6.08% (3.41) 6.07% (3.38)
Italy 5.28% (2.45) 5.72% (3.05) 5.77% (3.09)
So little change since Monday apart from Greece.
The much awaited results of the stress tests on European including British Bank balance sheets were published today. Nine banks failed the test, 2 Greek, 5Spanish 1 Austrian and 1 German. In addition 12 further banks came close to failing, 7 Spanish, 2 Greek, 2 Portuguese and 1 Cypriot. I find it puzzling no Italian bank was found wanting. Why? Well when I once contacted the Banca d'Italia to find out how many Italian banks they were they admitted they had no definitive answer and the last time they had mounted a count they had given up at 1000. I simply do not believe these figures in respect of Italy and I suspect the figures for Spain are an underestimate. The Greek figures are damning and indicate Greek bond rates will continue to go up and up.
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