Europe on the Edge

Tyler Durden at Zero Hedge blog thinks Europe is on the edge. The above chart is from Friday. Today yields pushed up further: Italy stayed above the dreaded 7% yield line and Spain flirted with it. Belgium and even France are seeing their spreads over German bunds opening up in potentially alarming ways.

Meanwhile the European Central Bank continues to make noises that they will not be the lender of last resort, following their fierce instructions from Germany. They come into the market and quiet things down for a bit; but they will not declare a yield target that they will defend, nor a specific bond purchase target (like the Fed did with Quantitative Easing).

If the ECB remains equivocal, we will have a European credit crisis, which will spread to the US. Our equities today seemed mostly unperturbed, ticking up slightly. Do investors really think we are decoupled from Europe?

I still think the ECB will eventually decide to be a committed buyer. But we may take some hits before this happens. And they might decide to stay out, in which case a mess is certain, in my books.