FT ALPHAVILLE has a good article reminding us all not to lose sight of the eurozone countries amidst all the Murdoch mania.
Spain has entered the danger zone for yield levels. The chart below shows the yield moves in the constant maturity 10y paper for the GIIPS countries. These markets traded a range between 6 per cent and 7 per cent but ultimately this proved to be a pause before the move to higher yields then accelerated. There is no consistent yield trigger level inside this range but market talk of point-of-no-return around the 6 ½% is not without foundation either.
Given that Spain (and likely soon Italy) has entered this territory of yield levels we now believe that there is a growing risk that a large systemic risk event is plausible in the near term and if not then in a matter of weeks.
The conditions for a near death experience for the Euro are in place now, which in turn should finally galvanise a more serious policy reaction. In the interim, risk assets can be crushed.