Continued hopes that the EU will cobble together a bank bailout for Spain that does not force a draconian EU/IMF program on Madrid is helping boost Spanish bonds relative to their German counterparts as well as on an outright basis.
From highs of 6.70% a bit over a week ago, we’ve tumbled to 6.15% today. Spreads have contracted to 4.77% from 5.41% last Wednesday.
The tighter that spread becomes, the less the tensions within the euro area capital markets…EUR/USD tends to rise as those spreads compress.
