1. sovereigns 2. banks 3. ratings agencies
Wash, rinse, repeat.
The yields go up, the banks suffer losses and the ratings agencies downgrade. It’s a vicious cycle and when you add in the politics and the economic impact, it gets even worse.
With yields once again moving higher it puts banks back in focus. The European TED spread is widening at a fast pace, showing a funding crunch and financial stress. This will lead to losses at banks and sovereigns.
The hope was for the EFSF to halt this cycle but it’s now clear that it has failed.
