Two days ago, we highlighted the fact that sovereign debt spreads in Europe relative to Germany were well off their highs and for many countries were actually making lower lows. Since then, Moody's lowered its ratings on six countries and the outcome of the Greek bailout process has been thrown into doubt.
As a result of these events, spreads for most EU countries have been back on the rise, although we would stress that they are nowhere near their recent highs. In Italy, spreads have risen by nearly 20 bps to 386 bps, while spreads in France have risen by 17 bps to 114 bps. Spain has seen its spreads rise 25 bps to 355 bps. Finally, while the increase in spreads in Greece is hardly visible on the chart, that is only because spreads are already so high in Greek debt. The reality is that Greek spreads have widened by more than any of the four countries shown at 35 bps.
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