Over the weekend we posted a chart illustrating how French bond yields are blowing out. Zero Hedge posted the following chart today illustrating the Belgium – German yield spread has just hit a new high. ZH has been spot on and has not waffled in its conviction with respect to the European Debt Crisis.
The rescue of Dexia and concerns over bank backstopping and recapitalization are putting stress on the sovereign credit of the core Euro countries, Irish style. Das ist nicht gut! Recall that what took down Ireland’s sovereign credit was the rescue of its banking system.
Furthermore, Merkel’s waffle today on the efficacy of the plan of the plan hints, at least to us, the Germans also fear being sucked into the black hole of deteriorating sovereign credit. Fear often results in paralysis. Let’s hope not. The pressure builds on the Euro policymakers to pull a rabbit out of the hat.
(click here if chart is not observable)