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The massacre in Italian and Spanish bonds continues apace – and CDS on euro area sovereigns continue to blow out to new highs. Not surprisingly, stock markets continue their recent crash-like move lower. It appears the break of the head and shoulders neckline in the S&P was akin to opening a trap door – at least at the time of writing, when the SPX was down over 40 points.

As we said yesterday – "the market is oversold, but it could become more so." "More so" it is.

Also, as we noted recently, there is still no joy for investors in gold stocks, in spite of gold hitting new highs almost daily (a sell-off related to margin calls in other markets could soon be in the offing, as investors cash in winners to make up for losses elsewhere). The persistent weakness in the sector relative to gold in fact warned of this possibility – and as is their wont, these shares decline now even more than the SPX.

Given that the crisis in euro-land continues day after day, and investors are belatedly waking up to the fact that the economy is in terrible shape, a continued waterfall decline cannot be ruled out, although we would expect to see a strong pick-up in short term volatility, with the occasional violent snap-back rally occurring.

CDS, yields and euro basis swaps below – prices in basis points, color coded where applicable.


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5 year CDS on Portugal, Italy, Greece and Spain – once again, new all time highs for CDS on Italy and Spain – for the first time ever, CDS spreads on Spain crack the 400 basis point barrier.


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5 year CDS on Ireland, France, Belgium and Japan – another new all time high for CDS on France's debt.


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5 year CDS on Bulgaria, Croatia, Hungary and Austria – not a pretty picture either.


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5 year CDS on Latvia, Lithuania, Slovenia and Slovakia – new highs for the euro area members.


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5 year CDS on Romania, Poland, Slovakia and Estonia – Poland now at new highs as well.


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5 year CDS on Saudi Arabia, Bahrain, Morocco and Turkey.


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One year euro basis swap – another new low, at over minus 39 basis points. Euro area banks are evidently in trouble.


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10 year government bond yields of Ireland, Greece, Portugal and Spain – Spain's at a new high of 6.314%.


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10 year government bond yields of Italy and Austria, U.K. gilts and the Greek 2 year note. Italy's bond yields continue to break higher – now at a new 14 year high of 6.224%. "Safe haven" yields continue their mirror image collapse – as we have noted before, the market sure has a twisted sense of humor. U.K. gilts at 2.69%? That one is truly funny.

Source: Euro Area Chart Update