French Bonds Infected as Greek Crisis Swells Euro-Region Spreads
by Lukanyo Mnyanda
June 16, 2015 — 11:41 AM CEST
Updated on June 16, 2015 — 5:44 PM CEST
(Don’t you love how when the derivative pyramid crumbles they call it an “infection” when its just simply math at work? By calling it a contagion they can blame the Greeks for the disease… That bubble was going to blow sooner or later, Greece or no Greece. -American Kabuki)
Europe’s bond selloff is spreading to markets traditionally viewed as safer, with only Germany remaining unscathed by Greece’s impasse with creditors.
The extra yield, or spread, that investors get for holding French or Belgian 10-year bonds rather than benchmark German debt surged above 50 basis points for the first time this year. Even bonds of the Netherlands and Finland, which have top AAA grades from at least two of the three major ratings companies, are suffering as the fallout from the Greek debacle spreads beyond the euro-zone periphery.
“The semi-core is selling off,” said Piet Lammens, head of research at KBC Bank NV in Brussels. “On the other hand, the gains the bunds have made have also been rather disappointing. With the Greek story you could have expected the bund to make more ground.”
The 10-year yield spread between French and German debt widened as much as nine basis points, or 0.09 percentage point, to 54, the most since March 2014. The gap was 44 basis points as of 4:26 p.m. London time, up from 33 as recently as June 11.
Belgium’s 10-year bonds yielded 45 basis points more than similar-maturity bunds, from 39 at the end of last week. Earlier in the day the spread was at 50.