European Government Bond Spreads Diverge; The Periphery Blows Out

Raise your hand if you want to buy a negative yielding 30 yr Swiss bond. That sounds like a great deal, to borrow money for 30 years and to get paid for the pleasure.

BREXIT is putting the fear of God into European sovereign bond traders, who are selling periphery bonds and buying German. If England leaves the EU, maybe Greece, Italy, Spain, Ireland and Portugal are next?

“The trajectory of European banks is really worrying,” said Lorne Baring, a fund manager who helps oversee $500 million at B Capital in Geneva. “If banks are a main indicator of the health of a region, it gives you another reason to think ‘what the hell is going on in Europe?”’

As such, this line of thinking is self perpetuating a fear that is spilling into equity markets. Failure to trade as a convoy is equal to not being one. Not being one, means the euro experiment is failing and that Germany is going to invade France again.

Any questions?