Great chart from Morgan Stanley, showing that for the first time, German yields are moving up along with everyone else’s.
If this trend continues it’s a huge deal, since it means that Germany is no longer a special intra-Europe safe-haven, where yields improve when everyone else’s get worse.
The fact that yields have been moving higher strongly suggests that yesterday’s German bond auction failure was not merely a technical matter, but rather a reflection (even if only a little bit) that credit risk is creeping into Germany, which would be: a big deal.
Photo: Morgan Stanley
Also, for what it’s worth, Morgan Stanley FX Pulse crew deserves big credit for flagging several days ago that German bund yields had stopped falling, even as peripheral yields were widening.