StockTouch Blog

What could a rise in German Yields Mean?

November 27, 2011 by Peter

 

The chart above from Morgan Stanley claims for the first time that the economic rock of the Eurozone, Germany, has its bond yields moving up. So what?

In a recent article by Joe Weisenthal over at Business insider, the claim is made that yields have risen, due to the “failed” German bond auction last Wednesday. He warns that higher yield could suggest the bond auction “failure” was not a technical matter, but a reflection of a possible credit risk in Germany. This is concerning as Eurozone stress was previously associated with lower German yields, while investors flocked to German notes from periphery debt filled countries for safety.

Now the mere rise in yield is not an alarming event in itself, but when coupled with a miserable bond auction, suggests that investors are loosing faith in the entire Eurozone, of which Germany is/[was] the safety net that held it together. This now results in a BIG issue, who can save Eurozone? Germany? The European Central Bank (ECB)?

Next week we have several more Eurozone countries auctioning off about $26bn in debt, if this trend keeps up things could get scary.

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