The charts below highlight the historical 10-year sovereign spreads of Italy, Spain, and France relative to Germany. As shown in the charts, spreads of Italian debt are currently trading 466 basis points (bps) above Germany. While Italian spreads have been rising in recent weeks, they remain well below the highs we saw in late 2011 (for now). Spain, on the other hand, is a different story. Spreads of Spanish debt relative to Germany surpassed their 2011 highs weeks ago, and although it is currently off its high from last week, at a level of 533 bps above Germany, the current spread is painfully high.
Finally, spreads between 10-year sovereign debt of France and Germany are at a relatively paltry 122 bps and remain well below their highs from late 2011. Things will become really scary in Europe if and when spreads in France start to blow out, and while that seems extremely unlikely now, it is important to remember that as recently as early 2011, the spreads of sovereign debt in Italy and Spain were both below 200 bps.