Markets

Bad to worse in the European Union

The prime minister of Spain, Jose Luis Rodriguez Zapatero, opted to push back his vacation to deal with the burgeoning debt crisis that threatens to batter the Iberian nation. With United States' own debt limit issue resolved - for the time being - investors worried about debt now pay more attention to the dicey sovereign bonds of the European Union's more fiscally troubled nations.

The latest step in the crisis was precipitated by a sudden rise in sovereign bond yields for both Spain and Italy, with the former reaching 6.46 percent and the latter climbing to 6.26 percent.

As the Wall Street Journal reports, analysts from Deutsche Bank recently wrote that trouble started for Greece, Ireland and Portugal once the 10-year benchmark bonds hit the the 7 percent yield level.

Despite the political drama over the debt ceiling, the situation in Europe remains far more serious. While the cost of borrowing for the U.S. government remains at record lows - as measured by the yield on Treasury notes - investors have little confidence in the bonds of the peripheral European countries.

If the precedent set by the Greek crisis is anything to go by, a happy ending remains distant for Spain and Italy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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