All eyes were on the Greece elections last night. Greece voters chose to stay on the Euro and accept the bailout money, kicking their problems further down the road. The markets originally liked this outcome over night, but since then the euphoria has worn off. The Euro crisis is far from over. Forget the headlines, let's look into the credit markets of specific country bond yields to see what they are saying. Below is a chart of Spain 10 year bond yields, which have reached new highs today.
So the cost of borrowing for Spain has increased to new elevated levels. I would have expected Spain 10 year bond yields to come down some, given the Greece elections have been decided. Italy 10 year bond yields have also increased today, but not as much as Spain. Below is a chart of Italy 10 year bond yields. Not an all time high, but still elevated at over 6%.
Bottom Line: The Greece elections were an important event to see if they would stay within the Euro. Even with the outcome to stay in the Euro, the 10 year bond yield in Spain reached a new all time high of over 7%. One has to ask, has anything really been solved. Has the sovereign debt crisis disappeared or have they simply borrowed more time?
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