The big news of the day is the weak German auction, and the higher yield on bunds, something that rarely ever happens.
First, Germany fundamentally faces the same debt dynamics as everyone else in Europe: Namely that it doesn’t have a lender of last resort.
Second, this has been in the works for a while.
This great chart from Morgan Stanley from the 17th shows how that even as peripheral yields have been widening, yields on German bunds haven’t been going lower, which means investors haven’t been shifting their money intra-Europe, but rather out of Europe altogether.
Today’s ugly German auction was just more confirmation of that.
Photo: Morgan Stanley