The spread between Greek and German 10 year bond yields is widening and has achieved a new multi-month high. Riccardo Ronco, Head of Technical Analysis at Aviate Global, thinks this may mean troubling times ahead for Greece and the Eurozone.
Michael Hartnett, Chief Investment Strategist at BofA Merrill Lynch Global Research, agrees. He points out that Greek bond yields have gone up more than 200bps in the past month as political instability compounds European deflation risk. He says, “a vicious circle of lower growth, lower stocks and rising rates, as creditors once again lose face in Europe’s credit-worthiness, would require ECB action.”