More spreads

by Stubborn Mule on 17 November 2011 · 9 comments

To provide a bit more context for the French government bond spreads discussed in the last post, the chart below shows the 5-year spreads to German bonds for a few more European countries.

All SpreadsWith spreads over 4300 basis points (43%), the chart is dominated by Greece, so here is the chart again with Greece removed.

Spreads without GreeceAs you can see in both charts, while French spreads are certainly heading north, they have a long way to go.

For those who have spotted the break in the line for Ireland, my data source seems to be missing 2010 data. I am looking into that and will update the casts if I plug the gaps.

Data source: Bloomberg.

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{ 9 comments… read them below or add one }

1 Magpie November 17, 2011 at 11:17 pm

So, although French (and Spanish) bonds are far indeed from the stratospheric levels currently reached by Greece, they’re about the same levels Greece reached about a year/a year and half ago.

I don’t know whether this is good or not: someone once said that if the choice is to be left hanging, he’d rather fall at once.

2 Magpie November 18, 2011 at 10:19 am

On another note: I might be missing something, but it seems strange that Ireland’s spread seemed to be shrinking, until recently.

Any ideas why that would happen?

3 zebra November 21, 2011 at 7:32 pm

@mule – I dont know if you’ve shown it before but I’d like to see a history of the ratio of debt to GDP which seems to be an oft quoted figure with 125%(?) being stated as the point of no return…

4 dan November 22, 2011 at 12:26 pm

i also noticed the irish reverse of course. might have something to do with the government standing behind the failed banks. can we see a graph of ireland v iceland please?

5 Stubborn Mule November 22, 2011 at 4:46 pm

@zebra I believe a figure like that is proffered in This Time is Different by Reinhart and Rogoff. I have not yet finished reading the book, but I am planning a post when I finish.

@dan I need to find some better data source: Bloomberg’s history of Iceland bond yields is a bit patchy. In the meantime, here is a rough chart showing generic 2-year yields for Ireland and Iceland. Iceland’s yields got up to near 14%, but once the government let the banks failed, yields dropped quickly. While Ireland’s yields are well below the highs of around 23% thanks to the EU/IMF bailout, they remain almost 5% higher than Iceland.

6 dan November 22, 2011 at 4:54 pm

thanks and while you’re at it, can you find out why i got a pink viking christmas tree with duck feet for my avatar?

7 Magpie November 22, 2011 at 6:42 pm


“i also noticed the irish reverse of course. might have something to do with the government standing behind the failed banks.”

Now that you mention it, that’s certainly a possibility. But that the government stood behind them doesn’t make Ireland any less broke: is there any good reason to believe the Irish government will be able to service this debt?

I’ll admit it: I haven’t been following things in Ireland closely. Is GDP credibly projected to grow in Ireland?

8 Stubborn Mule November 22, 2011 at 8:41 pm

Standing behind their banks happened much earlier (2009) and it was the increasing realization that this could send the government broke is what really sent Irish yields soaring as the extent of the problems with the Irish banks became clearer. It was only with EU/IMF support that yields came down again…although they are still high.

9 Stubborn Mule November 23, 2011 at 6:56 am

@dan you do have a particularly attractive avatar their. I can, however, assure you, it’s quite random. If you want to get a more appropriate image in its place, you can refer to this post about Gravatars.

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