Greece, not surprisingly, is back in the headlines due to their seemingly constant need of bailouts funds and the issues that come with that. This time though, unlike the September & October months of 2011, the headlines out of Greece aren’t causing much panic. We don’t say that because the market is doing well, although that is proof enough, we say that because of the action in many of the 10 year bond yields in key EU nations.Belgium, Spain, and Italy, three EU countries that saw their 10 yields skyrocket during the fall of 2011, aren’t seeing their bond yields rise so dramatically this time around. Belgium’s 10 year yield has declined 39% since November, Spain’s has fallen by 24%, and Italy’s 21% both over the same period. In the last week or so since the Greece drama started again (if it ever stopped in the first place), only Spain has seen their yield rise and albeit only by a marginal amount.
Our point is that if the bond markets were really worried about Greece and the potential for a nasty default, we would be seeing bond yields rise in countries like the aforementioned. Whether the market is right to not be worried is another question all together but it’s clear to us that in the interim the Greece headlines should not be cause for alarm. Instead the more likely assassin of this rally will be the U.S. dollar. The currency traded in a very tight range today at the bottom of a downtrend and may be ready for a bounce higher.
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