The Entire Sovereign Debt Crisis Can Be Understood By Looking At Sweden Vs. Finland

These two charts basically explain everything.

The first chart shows the yield on the Swedish 5-year bond.

As you can see, it’s absolutely plummeting right now.

chart

Photo: Bloomberg

Now here’s a look at its neighbour, Finland, and the yields on its 5-year bond.

chart

Photo: Bloomberg

Basically they look identical all through the year up until November and then BAM. Finnish yields are exploding higher, right as Swedish yields are blasting lower.

The only obvious difference between the two: Finland is part of the Eurozone, meaning it can’t print its own money. Sweden has no such risk.

This is a narrow version of something that much of the media picks up on earlier last week that UK gilts were trading with a lower yield that German bonds, a reflection of the same principle: In UK the government can print. In Germany, it can’t.

Right now, this is what investors demand, and if you don’t have your own central bank that can pay off your debts, you’re in trouble.

There’s one other point here, which is that the spike in Finnish yields stands on its own as being remarkable. Clearly November will go down as the month when sovereign debt fears in Europe stopped being a peripheral issues, but rather an issue for everyone, including Northern states that you’d figure are bastions of stability.

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