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First Greece, Then Ireland, Now Spain

spanish-bonds

Tyler Durden is reporting that yields on the Spanish 10-year government bond have hit all-time highs as worries about the fiscal situation in Spain intensifies. Bond investors are requiring ever higher yields to loan money to the Spanish Government.

This can have a big impact on financial markets, much like the Greece situation did to derail the market in April. Is this what the predictive ability of the bank index (see the previous post) is telling us? Hard to tell.

One thing that Tyler mentions is that if the US 10-year bond were to do this, based upon the sheer extent of US Treasury bonds bought in QE2, the impact on our Federal Reserve would be to exhaust all of its capital four times over.

The unanticipated impacts of QE2 continue to come to light.

Mark