Monday, May 10, 2010

Euro debt crisis watch research report

Sunday night the EU, IMF and ECB announced bold measures to stabilise the financial markets (see Flash Comment - EU agreement to combat crisis).  ECB has been purchasing Greek, Portuguese and Spanish sovereign debt in the secondary markets this morning. PIIGs spread is narrowing significantly. The spread between 2-year Greek and German yield has narrowed more than 13bp.  Risky asset markets are in a massive relief rally. Global equities surging across the board. Southern European indexes leading the way gaining about 10% on the day.  Bank equities are recovering sharply and default protection is cheapening. In covered bond markets, asset swap spreads tightening.  The euro has recovered with EUR/USD rising to 1.30 after being briefly below 1.26 during Friday.  Money markets tensions are easing and swap spreads are tightening.  Emerging markets currencies are recovering.  Volatility is on the decline in all markets.

Euro debt crisis watch

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