EU Bonds

One solution that seemed to make sense a couple of months ago was the EU, as a union, issuing bonds, so that those with high rates - like Italy, Greece, Spain and the like - can finance with better rates by financing with those with low rates, like Germany. Well, it seems Germany is starting to run into a smidge of a ripple in rates. Nothing too serious just yet, but bond rates is a confidence business and the minute those buying the bonds get a bit spooked, the rates go up. All this means that the prospect of a EU unified bond sale is becoming more problematic. Obviously, there is still a quantum leap between German rates and say Italian rates, but is seems to me a common EU bond will price toward the negative, like Greece, Italy and Spain, and not toward the positive. The buyers are already getting a bit edgy about Germany and the fact that its banks are heavily exposed to EU sovereign debt.

China seems to be slowing too, which is no big surprise. With its biggest export markets sucking wind and a domestic real estate bubble, hard to believe anything else will happen.

Disclosures: None.