Spreads between Spanish and German bods have narrowed sharply today with most of the improvement coming in the last hour or so. We’ve narrowed as far as 177 bp after spending much of last week in the 195/200 bp area.
There is no Spanish-centric news I can find today but perhaps traders are pricing in a not-too-rigorous stress test result into the credit markets.
Narrower spreads are supportive of EUR/USD, suggesting sovereign debt tensions are abating further.
