December 30th, 2014 7:55 am | by John Jansen |

I began following 10 year Spain versus 10 year US on June 18 at which time Spain was trading at 2.755 and the 10 year Treasury changed hands at the bargain price of 2.632 which placed Spain 12.2 basis points cheap to US. In a great reversal 10 year Spain is now about 60 basis points rich to US 1.59 versus 2.19. I guess there is no spillover this time from the long running tragedy in Greece.

Here is a Bloomberg story on the topic:

Italy Sells Bonds at Record Yield as Greek Woes Seen Contained

By Eshe Nelson Dec 30, 2014 5:32 AM ETe

Italy auctioned 10-year government bonds to yield less than 2 percent for the first time on record, a sign that the potential for more European Central Bank stimulus is insulating the nation’s debt from a selloff in Greek securities.

The auction caps the best year for European government bonds since 1995 and a rally that has sent borrowing costs from Germany to Ireland to all-time lows.

Fueling the gains has been slowing growth and inflation in the euro region that prompted the ECB to lower interest rates in order to boost the economy. With data today showing Spanish consumer prices declined the most in more than five years this month, the prospect of additional ECB measures, including buying government bonds, is helping to prevent contagion spreading from Greece, which faces snap elections next month.

Italy sold almost 3 billion euros ($3.6 billion) of December 2024 securities at an average yield of 1.89 percent today, down from 2.08 percent at an auction on Nov. 27, according to data from the Bank of Italy in Rome. The nation also sold floating-rate debt and five-year notes.

Italy’s 10-year yield dropped six basis points, or 0.06 percentage point, in the secondary market to 1.93 percent at 10:25 a.m. London time. The rate fell to 1.911 percent on Dec. 23, the least since Bloomberg began collecting the data in 1993. The 2.5 percent bond due in December 2024 rose 0.515, or 5.15 euros per 1,000-euro face amount, to 105.245.

Spain’s 10-year yield fell four basis points to a record-low 1.633 percent. The nation’s annualized inflation rate declined 1.1 percent in December, the most since July 2009.

Greece’s 10-year yield rose six basis points to 9.59 percent. It reached 9.85 percent yesterday, the highest since September 2013. The three-year note yield jumped 65 basis points to 12.74 percent.

Europe’s bonds returned 13 percent this year, according to the Bank of America Merrill Lynch Euro Government Index.

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