More people should be talking about the fact that the credit risks in countries like Ireland and Portugal have gone back up to record levels. Talk about canaries in the macro coal mine...
The spread between what it costs to insure debt on the euro periphery -- Ireland and Portugal in particular -- and the cost of insuring comparable bonds in the core (Germany) has crept back up in the last few weeks.
Despite assurances to the contrary from people like Goldman Sachs, the markets are still worried about the prospect that one of these countries will eventually default on its debt. At this point, both Portuguese and Irish bonds are trading at a record discount compared to German debt, which has rallied as euro traders hope to contain their risk exposure.
Spanish yield spreads are also rising to two-month highs, but are still slightly better than the levels they suffered at the peak of the euro crisis. Traders widely expect at least one more credit rating downgrade for Spain in the next week or so. Irish banks, especially AIB, have been back under pressure as a result of this. Not a good time to buy these stocks. There will likely be more bad news -- and not much good news -- to come.
Among emerging debt funds, PMB and ECY already avoid the euro periphery.