The end of the US summer holiday period is upon us, and with it, a return to reality. The markets are again concerned re Eurobanks, as the fears registered in EU periphery country bond spreads are now registering with investors in other markets. Per Bloomberg:
The gaps between 10- year German bond yields and those of Irish and Portuguese debt climbed to all-time highs, while the German-Greek yield spread increased to the widest since May.
“Widening spreads are like a canary in a coal mine,” said Quincy Krosby, chief market strategist for Newark, New Jersey- based Prudential Financial Inc., which oversees $690 billion. “It’s a signal that debt concerns are mounting. In order for the stock market to move higher, investors will have to see a solid package of data suggesting that we’re avoiding a double- dip recession.”
Gold has traded up to $1258 an ounce, near its recent highs but the euro is still within its recent 1.27 to the dollar trading range. The big impetus for the gold spike earlier this year had been European investors selling euros to buy gold. That may revive if rattled nerves and with it, funding stress rises, but it is also possible that investors may look to a more diverse menu of “safety” trades this go round.