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Euro Area Credit Market Charts

Below is our customary collection of CDS prices, bond yields, euro basis swaps and several other charts. Both charts and price scales are color coded. Prices are as of Thursday's close. The plunge in euro basis swaps continues and our proprietary euro-bank CDS index is at a new high. CDS on Greece have exploded into the blue yonder.


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5 year CDS on Portugal, Italy, Greece and Spain – a new all time high for CDS on Greece, which now clock in at an unbelievable 7,900 basis points. Whoever it was that 'bought the dip' following the haircut agreement has made a huge profit.


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5 year CDS on France, Belgium, Ireland and Japan – CDS on France and Belgium continue to be at levels that can not be reconciled with their current credit ratings.


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5 year CDS on Bulgaria, Croatia, Hungary and Austria.


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5 year CDS on Latvia, Lithuania, Slovenia and Slovakia – several new highs here as well.


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5 year CDS on Romania, Poland, Slovakia and Estonia.


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5 year CDS on Germany, the U.S. and the Markit SovX index of CDS on 19 Western European sovereigns. The SovX is off just a tiny bit from a recent all time high.


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Three month, one year and five year euro basis swaps – the plunge continues following the recent break of support.


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Our proprietary unweighted index of 5 year CDS on eight major European banks (BBVA, Banca Monte dei Paschi di Siena, Societe Generale, BNP Paribas, Deutsche Bank, UBS, Intesa Sanpaolo and Unicredito) – a new all time high!


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5 year CDS on Austria's Erstebank and Raiffeisen Bank (based to 100 as of August) – also still rising.


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10 year government bond yields of Italy, Greece, Portugal and Spain – Spain's yields continue to play catch-up with Italy's.


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10 year government bond yield of Austria, the 9 year government bond yield of Ireland, U.K. Gilts and the Greek 2 year note.


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10 year government bond yield of France - a slight dip.


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10 year government bond yield of Spain - new high (today it increased further, to 6.77%).


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10 year government bond yield of Portugal – consolidating in its recent trading range. This is one that needs to be closely watched – we think Portugal may yet turn into the next Greece, although a recent 'troika' assessment confirmed that the country's fiscal plans remain on track. Alas, the economic downturn may yet alter that happy situation in coming months.


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Italy's 10/2 spread remains very tight and close to inversion.

Addendum:

Germany's vice chancellor and economy minister Philip Rösler has come up with a great idea: end the bull market in emergency meetings.

As the WSJ reports:

"German Economy Minister Philipp Roesler has had a fantastic idea that should help us out of the euro crisis swamp. Europe needs stronger political integration, he said Thursday. The common currency needs common rules, he said. Some sovereign rights may have to be relinquished, he added.

That’s all well and good.

But his best idea, indeed probably the best proposal put forward by any European official so far, is this: Limit the number of crisis summits. Note: not the number of crises. Just the number of summits.

It’s tough to see how this could work. Should the eurocrats stand back when the flames are licking at their feet, and do nothing to reassure markets? Or is Mr. Roesler indirectly affirming what we all already know: The summits somehow seem to make everything worse?"

Indeed, the track record of these emergency summits isn't very good so far. As a side effect, cutting down on them would save tax payers a nice bundle as well, both directly and indirectly.

Charts by: Bloomberg, Financial Times

Source: ECB Under Pressure - The Bank Funding Crisis Escalates: Part 2