Many expected the results of this weekend’s Greek parliamentary elections to spark a global risk-on rally at least in the near-term. To recap, the pro-bailout, New Democracy party won the elections assuaging fears that Greece could soon exit the euro in a disorderly fashion.
However, yields on Spanish debt soared ever higher today. The slump in 10-year notes pushed yields as high as 7.2850 per cent, a euro-area record, before falling back. Other issuances also hit fresh highs, with two- and five-year yields topping 5.577 and 6.723 per cent, respectively.
Part of the concern sending borrowing costs to these heights is the threat that Spain could lose access to the debt markets as its banking sector wobbles and creditors worry they could be subordinated to bailout guarantors.
The 10-year bond finished the day at 7.1580 per cent, forming a bizarre middle-finger-like pattern.
Perhaps this is the bond market’s way of saying that the elections solved nothing.
Below, the 10-year.