That’s the line from Citi’s FX Guru Steven Englander, who looked this week at the big trends in European and developed country borrowing costs:
The solid red lines are GDP-weighted average rates in the euro 11; the dotted red lines are GDP-weighted rates excluding Greece, Ireland and Portugal, the original peripherals. (One might add parenthetically: ‘We are all peripherals now’.) The red lines include Germany with its 30% weight in the euro zone. The upward move in euro zone rates, even when the original peripherals are excluded, represents a major divergence between rate trends in the euro zone and elsewhere. The other G10 countries in the chart include countries with good and bad fiscal fundamentals, so the divergence is not a market view on fiscal trends, but a view on where economies and monetary policies are headed.