The mass selloff drove up the debt yields of countries that had been considered havens, including Finland and the Netherlands. “Global financial markets are facing a key pivotal point,” analysts at Barclays Capital said in a Tuesday research note. “A further escalation of the European debt crisis is putting at risk the nascent stabilization of global growth.”Yields on Italian bonds are back above 7%.
Spanish bonds are yielding between 5 and 6.3% - depending on maturity.
For comparison, Germany is able to borrow money at just 1.76%, with France (who is also in trouble) at just over 3%.
Economists think the rush to sell sovereign bonds was triggered by several factors: a European Union agreement with the banks to write down Greek bonds by 50 per cent, creating a precedent that bond investors fear will be repeated elsewhere in the euro zone; the European Central Bank’s reluctance to buy distressed bonds; and European politicians open talk about member countries leaving the euro zone.To add insult to injury, the Euro Zone's GDP was up a mere 0.2 percent in the 3rd quarter. (0.8% annual growth, more or less.) While Germany did OK, the rest, not so well.
On Tuesday, Dutch Prime Minister Mark Rutte said it should be possible to expel members from the euro zone. The day before, German Chancellor Angela Merkel’s Christian Democratic Union party voted to allow countries to leave the euro zone. While the vote carries no legal weight, it reflects the CDU’s rising skepticism about the euro project.