The euro should be doing better with periphery yields tumbling
- Italian 10-year spread over Germans down almost 30 basis points with the yield at 4.94%.
- Even French yields are down 11 bps to the lowest since Oct 2011
- Spanish spread down 16 bps with a yield of 4.84% after touching the lowest since Nov 2010
It’s easy to say that this is LTRO money, but the program was about the size expected so the speculative market would have taken these yields down if they anticipated this kind of flow into sovereigns.
The declines in yields are definitely a surprise and a euro positive yet EUR/USD is doing nothing — even with stocks up and soft ISM data. The old saying about selling something that can’t rally on positive news applies here.