Yields And Momentum: Too Early To Buy Aggressively
By Chris Ciovacco: Since over-indebted nations must constantly sell bonds to raise capital, Italy (EWI) and Spain (EWP) are forced to enter very unfriendly markets. Italy, selling short-term notes this morning, was greeted rather rudely by bond investors. From Bloomberg:
Italy's borrowing costs surged at the sale of 6.5 billion euros ($8.2 billion) of Treasury bills after the 100 billion-euro bailout of Spain's banking system failed to stop contagion from the region's debt crisis. The Rome-based Treasury sold the one-year bills at 3.972%, 1.63 percentage points more than the 2.34% at the previous auction on May 11. Investors bid for 1.73 times the amount offered, down from 1.79 times last month.
Like many investors, we woke up Monday morning ready to redeploy some cash based on the euphoric response to the weekend bailout for Spanish banks. With a strong rally in Monday's pre-market S&P futures, we expected to see some "risk on" quotesComplete Story »