All Eyes on Bernanke
To the surprise of very few, the early rally in risk assets fizzled just after the European open this morning, as Spanish 10-year yields reversed 35 basis points, to a record 7.10% in the first three hours of trading. By 7:00 a.m. EDT, Bloomberg news was reporting headlines of the draft prepared for the upcoming EU summit in Brussels June 28 and June 29. According to the draft, the EU will "mobilize all levers and instruments." The draft also encourages the EU to launch the European stability mechanism (ESM) by July 9. Recall that this 500-billion-euro bazooka has yet to be officially put in place. Hopium rules.
With the Greek elections now officially concluded for the moment, the arduous task of cobbling together a coalition government has commenced (again). Headline risk grows as the posturing escalates, but clearly Greek politics has now become but a sideshow in the ongoing European drama. Thankfully, the ratification vote in Germany for the ESM is not scheduled to take place until July. So now the Spanish financial system, along with Spanish sovereign debt, has assumed the lead sled dog position in the crisis. The early results from Madrid are extremely troubling....532 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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