Morning Thoughts June 13

  • Things are changing here…besides the selloff after the Spain bank bailout note this:
  • German 10-yr yields 1.504%, highest since May 16; EUR/USD at $1.2517 after falling to two-year low of $1.2288 on June 1; Spain 10-yr 6.67% after yesterday reaching euro-era high of 6.834%
  • Movement in bunds and EUR/USD are “warning signs that Germany simply can’t covering the bad debt of the likes of Spain,” Macrostrategy’s David Goldman wrote in note dated yesterday
  • Previously, as risk aversion drove up dollar exchange rate, bund yields fell in lockstep with decline in EUR/USD
  • After Spain’s bailout announcement, however, this correlation collapsed: “bund yields rose as the Euro fell (and as weaker European debt cratered); the haven status of German debt, that is, began to look a bit tarnished”

 

From a chart perspective it makes sense too…German bunds have gone parabolic and are still in mean reversion mode.  I am watching for bund movements to time the U.S. treasuries market better.  I do want to get short some treasuries at some point, just not yet.

For broader market thoughts watch the morning video and read the piece on the Nasdaq

 

 

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