The Spanish bank bailout is old news. Today, Spanish and Italian bond yields are up. There is therefore speculation about a needed bailout for Spain (the government as opposed to its banks), and possibly for Italy. The crisis continues.
The yield on the Spanish 10-year note rose yesterday despite the news of EU backing for the Spanish bank bailout. This morning, the yield is up to 6.63% from 6.48% yesterday. On Friday, the yield was at 6.18%. This wasn't supposed to happen. There is already talk that the bank bailout is too little, too late.
Italian bond yields are also up, with the 10-year yield reaching 6.15%. For reasons unquantifiable, the market has decided that 7% is the "unsustainable" rate at which a true crisis/panic occurs for both Spain and Italy. It will be important to watch these bond yields in the days ahead.
Cyprus, which has a population of slightly more than 800,000 and is the third smallest country in the euro zone behind only Malta (400,000) and Luxembourg (500,000), has also requested a bailout. Its economy accounts for 0.2% of the euro-zone GDP. The bailout would reportedly be only a few billion euros. Cyprus is a sideshow compared to Spain (12% of euro-zone GDP with a population of 46,000,000).
Despite the higher yields and talk of more bailouts, European stock exchanges are fractionally higher, and the euro is even up a bit, inching back towards 1.25 against the dollar.
Once again, there are no US economic releases and no corporate news of note. It is all about Europe.
S&P futures currently suggest an up open of a couple of points. That looks purely like a bounce after yesterday's extremely disappointing sell-off. There is already a great deal of skepticism that any bounce will hold during today's trading.
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