European credit stress

French government bond yields widen to record vs Germany: Portugal faces national emergency; Trichet says “Europe will not be lender of last resort”

Mish's Global Economic Analysis, 

14 October, 2011

Credit stress has now hit France sovereign debt. The spread between 10-year French bonds and German government bonds is at a Euro-era record 97 basis point differential.

France 10-Year Government Bonds

Germany 10-Year Government Bonds

Italy 10-Year Government Bonds

Portugal 10-Year Government Bonds

Spain 10-Year Government Bonds

Greece 1-Year Government Bonds

French Bond Yields Jump Most Since 2008 

Bloomberg reports French Bond Yields Jump Most Since 2008 on Bank Concern

Ten-year French yields climbed 38 basis points this week, the most since the euro was introduced in 1999. The extra yield investors demand to hold 10-year French bonds instead of German bunds also expanded to the most since the euro started. Spain’s 10-year bonds fell for a fifth day after Standard & Poor’s cut the nation’s credit rating. Yields climbed across the euro area after European Central Bank President Jean-Claude Trichet said the ECB will not act as a “lender of last resort.”

The eight largest U.S. money-market funds reduced their lending to French banks by 44 percent last month, according to filings compiled by Bloomberg and published in today’s Bloomberg Risk newsletter.

Spanish 10-year yields climbed four basis points to 5.24 percent, even after the ECB was said by people with knowledge of the deals to have bought the nation’s securities. S&P cut Spain’s ranking by one level to AA-, with the outlook remaining negative, the company said yesterday.

Portugal Faces National Emergency

Portugal 10-year yield increased five basis points to 11.64 percent. The nation is planning to deepen budget cuts next year as it faces a moment of “national emergency,” and has to do more to meet its budget goals, Prime Minister Pedro Passos Coelho said.

Trichet a Proven Liar

Does this look like anything has been contained or does it look like the problem is spreading to France (as a result of foolish containment efforts)?

By the way, Trichet is a proven liar. The ECB is already acting as a lender of last resort by supporting Italian bonds and foolishly buying Greek bonds previously.