Those wondering when the yield on
Spain's 2-year government bond would exceed 7% now have an answer. Today is
Note: the lines on the charts below reflect yesterday's close. The numbers in
green accurately reflect today's price movements.
Spain 2-Year Government Bond Yield
Of further interest please note the inversion at the long end of the curve.
The yield on 5-year treasuries now exceeds that on the 10-year treasury.
Spain 5-Year Government Bond Yield
Spain 10-Year Government Bond Yield
2-Year Yield + 36.5 basis points to 7.007%
5-Year Yield + 12.5 basis points to 7.717%
10-Year Yield + 2.7 basis points to 7.648%
The inversion is slight but the massive yield increase on the shorter end is
significant. If this action continues, and I expect it will, the market is
pricing in a sovereign debt restructuring of Spain, including bond haircuts.