European sovereign debt concerns back in spotlights

- "As concerns about a US ‘double-dip’ have eased somewhat, European sovereign debt concerns started to attract attention again last week (p.2, p.3 & p.4)."
- "This week’s focus is on US retail sales tomorrow and CPI inflation on Friday, on the German ZEW index tomorrow, and on UK CPI inflation tomorrow and the labour market report on Wednesday (p.2, p.3 & p.4)."
- "The Chart of the Week shows government bond yields of Portugal, Ireland, Greece and Spain. Many names have been used to describe the crisis that already started more than 3(!) years ago. At first, the term subprime crisis was used, but quite rapidly it was called a liquidity, credit and/or bank crisis. Since late last year/early this year, the term sovereign debt crisis has often hit the headlines. Clearly, these are all different kinds of crises, but at least they all appear to be caused by too much debt. As such, concerns about the fiscal situation of the so-called euro zone periphery countries will probably not really fade as long as debt/GDP ratios are high and even increasing, despite the European rescue packages. In fact, the rise of government bond yields of especially Portugal, Greece and Ireland over the last weeks reminds us somewhat of the start of this crisis in 2007 when subprime RMBS spreads widened, thereafter tightened as markets thought that the worst was over, but unfortunately widened again to even higher levels etc. Also over the last few months, yields continued to drift higher, but this remained more or less out of the spotlights as (mainly US) ‘double-dip’ fears dominated. Let’s hope that history will not repeat itself, but we are not convinced that the euro zone periphery countries are out of the woods yet."

NIBC Markets Roundup 20100913

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