Monday, May 14, 2012

Bond markets ; not yet fearful

Greece exit out of Eurozone is starting to seem more and more likely, but bond markets don’t seem to be inordinately worried.

There is no denying the fear factor across the global markets driven by anxiety around possibility of Greece exit from Eurozone.

Major equity markets across the globe have been on a minor downtrend since last week itself.

But what do the European bond markets say? Bond markets are definitely showing signs of anxiety but not the kind of fear displayed in Equity markets.

Spanish and Italian yields that have been inching up slowly over the past three months and are now in 6% range, but are much lower than the 7.5% levels reached towards end of last year. Of course, German yields are falling; and at 1.4%; are making new 52 week lows. That’s understandable as that’s likely to be driven by the flight to safety within the Eurozone.

It almost seems as if the bond markets are ready for a Greece exit and might even be hoping that it happens !