German Bond Yields Are On Fire Again

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MADRID – Markets in Europe aren’t doing too much of anything. They’re modestly higher, and yields on Spanish and Italian debt (which is what everyone has their eyes on) are a bit lower.But keep paying attention to Germany where yields are jumping notably for the second straight day.

The yield on the 10-year bond is now 1.49300%, which is incredibly low, but it’s worth noting that a few days ago the yield hit a low of 1.127% according to Bloomberg.

There’s this growing sense that Germany is on the hook for more nad more debt, and that means its yields have two reasons to go higher.

1. It’s seen as getting a tad riskier. German yields are incredibly low, and there’s no question that it’s the safest country in the Eurozone, but credit risk is credit risk, even at the extreme margins.

2. The good reason for German yields to rise is that it’s a signal of pressure leaving the system, as belief grows that the worst-case scenario of a disorderly meltdown is not likely to happen. The same dynamics could be at play. Germany is seen as backstopping the whole thing, and that relieves pressure from the system.

US futures are a share lower.

UPDATE (6:20 AM EST):

Germany’s 10-Year bond yield has ticked up to 1.52400%.  Here’s what the intraday chart looks like.

german bond yieldGermany’s 10-Year Bond

Photo: Bloomberg

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