I think the influence of speculators in general is grossly overstated. What you have to keep in mind is that for every speculator shorting a bond (and driving up the yield) there is someone buying it. What speculators do is increase liquidity which results in much faster reflection of current conditions in the price.Looks worrying alright. I wonder if a few "influential" speculators began betting against a country would everyone else pile in resulting in the yields rising? The reason I'm asking is why (Ireland's debt is a bit different as it has balloned due to bailing out the banks) have all these European countries with longtime large deficits only now seeing such pressure on their bond rates?
I always find the word contagion misplaced in this sense. What this indicates is that like a disease the financial crisis spreads from one country to another. A much more accurate analogy would be to say that the market has found a new way to diagnose an existing disease, and with this new ability it is now possible to identify the disease in more places. The ability to diagnose has done nothing to spread the disease, it simply identifies it where it already exists.A collapse of either would be cathrostophic for the EU and would certaintly lead to further contagion and an ultimate end game for the Euro. I can't see France/Germany allowing this to happen and would expect a far higher level of respose/urgency than that applied to the PIGS countries. Issue of single Euro Bonds are a possibility but there will be attempts to contain the markets and maintain some level of stability. Whether these work or not is another question.
Anybody else get a sense of déjà vu? The next few weeks/months will tell whether the Italian story pans out the same as the other 3, but I'm betting it will.
The Euro bond is getting closer... it is just a question of how much pain German and France is will to take before the accept it, me thinks.
Jim.
The only thing that surprises me is that it took 4 months to get to this stage.
Are the Eurocrats ever going to learn that this mess is beyond their control? That countries spent too much money and it is coming home to bite them in the "culo"?
Hopefully Europe will come to the conclusion that Iceland came to, and realise that €1.6tr of Italian debt is too much to bail out, but I'm not holding my breath.
We have known that Italy has had an enormous debt to GDP ratio for some time, why only react to that now?
"Sentiment"
If bondholders and speculators actually operated in a non-socialised market then we would see a much more rapid cleansing of the debt markets, but unfortunately governments around the world are doing everything they can to create a back stop instead.
The Euro bond is getting closer... it is just a question of how much pain German and France is will to take before the accept it, me thinks.
Jim.
"Sentiment"
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