Bond Market: 10%-20% Chance That EU Disintegrates

Blackrock is stepping up debt purchases in Spain, Greece and Italy on the belief that spreads are just insane:

Bloomberg: Prices now reflect odds of between 10 per cent and 20 per cent that the euro-region will disintegrate following a series of credit downgrades from Standard & Poor’s this month, according to BlackRock. The difference in yields, or spreads, between the three nation’s 10-year bonds and those of benchmark German securities was close to the widest today since the euro’s debut in 1999.

“You have got to ask yourself at what point this becomes ridiculous,” Scott Thiel, head of European fixed income in London at BlackRock, which manages $1.3 trillion, said in an interview Jan. 23. “That’s too high if you step back and take a deep breath. We’ve begun to add back exposure” of these bonds.

Well, we hope. Most of the time a human calls the market insane or ridiculous, they end up eating crow.

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