Outside the Beltway

Spanish Bonds

Steven L. Taylor
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Via the BBC:  Spain’s borrowing costs at fresh high after Moody’s cut

Spain’s borrowing costs have risen to another euro-era record, with lenders demanding a higher interest rate.

The yield on benchmark 10-year bonds hit 7% in early trade, a level which many analysts believe is unsustainable in the long term. It later fell back slightly.

It came as Moody’s cut Spain’s credit rating to one notch above “junk”.

Italy also saw borrowing costs rise, selling bonds repayable in three years with a yield of 5.3%, up from 3.9%.

Meanwhile, a ten year US treasury note was at 1.62% as of 2:50pm EDT and Greek bonds  at 28.54% as of noon.

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8 responses to “Spanish Bonds”

  1. john personna Avatar
    john personna

    Also on the domestic front, Key Measures show slowing inflation in May

    1. Doug Mataconis Avatar
      Doug Mataconis

      Actually, what they showed was deflation. Which isn’t necessarily a good thing

  2. john personna Avatar
    john personna

    @Doug Mataconis:

    deflation

    For the month, yes. I think CR chose “slowing inflation” because they think the “index for all items less food and energy” (up 0.2 percent in May) will be more indicative of the future.

    I actually prefer year-over-year numbers to the monthlies or thee “ex food/fuel” numbers.

    This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 2.1%, and core CPI rose 2.3%. Core PCE is for April and increased 1.9% year-over-year.

  3. Jeremy R Avatar
    Jeremy R

    When Ben Bernanke was on Capitol Hill to testify in front of the Joint Economic Committee the other week, GOP senators were still banging the stop the activism, you’re doing too much, “INFLATION!”, drum:

    Rep. Kevin Brady: I wish you would look the market in the eye and say The Fed has done all it can perhaps too much.

    Sen. Jim DeMint: I think you’d have to agree that the activism has been unprecedented.

    It went on like that.

  4. Gustopher Avatar
    Gustopher

    If the previous financial crisises were any indication, the one thing we have learned is that the bond holders never, ever lose.

    Do people really think there’s a significant chance that this time would be different, to justify the higher rates?

  5. David Anderson Avatar
    David Anderson

    @Gustopher: Well, the Greek bond holders who were not official bond holders took a serious loss, and if the Euro blows up, the reintroduction of the peso, lira, drachma etc will lead to significant (and needed) inflation, which also leads to real losses on the bonds.

    there is a chance that some bond holders could actually take a loss.

  6. al-Ameda Avatar
    al-Ameda

    @Doug Mataconis:

    Actually, what they showed was deflation. Which isn’t necessarily a good thing

    Exactly right.

    Deflation should worry Americans far more than inflation, however there are many people out there who believe that our current deficit situation will at some point set off a hyper-inflation.
    Right now, for all the bleating about fuel and energy prices the rate of inflation is very low, and recession and deflation are becoming real concerns.

  7. john personna Avatar
    john personna

    @al-Ameda:

    Using the important year-over-year numbers we’re further from deflation than we’ve been since 2009.

    The 2009 to 2010 trend was pretty much down hill, in 2011 that reversed sharply.

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