It has been a few weeks since we last looked at 10-year sovereign debt spreads of some of the more high profile EU countries relative to Germany. Given Friday’s 5% drop in Spain’s IBEX stock index, we thought it would be a good time to provide an update of the spreads of Spanish, Italian, and French debt relative to Germany.
As shown in the charts below, spreads of Spanish debt relative to Germany have widened out to record highs. In the last month alone, 10-year spreads on Spanish debt have widened out by nearly 100 basis points (bps) to 606 bps. At what point will the camel’s back break?
In Italy, spreads on 10-year debt have widened out by 84 bps in the last month to nearly 500 bps but still remain below last Fall’s highs of 550 bps. Finally, while spreads on Spanish and Italian debt are widening, spreads on French debt have narrowed by 16 bps in the last month and are currently at their lowest levels of 2012.