Blast from the past: About a month ago, on October 29, we declared that we were going to be watching the spread between Italian and German yields like a hawk.
What a difference a month makes. This week we’re less interested in that spread, and now we’re interested specifically in German bonds.
Last week was the week that an asset previously viewed as a pure safe-haven got to be viewed with some suspicion thanks to very mediocre demand at an auction. That focused everyone’s attention on the fact that bund yields have been rising for several days now, in contravention of the previous trend, whereby yields compressed whenever risk appetite fell.
So if you’re playing along with us, just use this link at Bloomberg and watch to see whether yields are rising or falling at times when things are selling off. If they’re rising alongside Italian, Spanish, and French yields… watch out.
Meanwhile, if you’re looking for other stuff to watch, PIMCO’s Mohamed El-Erian suggests that in addition to core yields, you should watch for yield curve inversion on the periphery, and any important policy.