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90 seconds at 9 am: Spanish bond market rout continues again as Euro-zone break up fears deepen; Moody's may downgrade Germany; Safe haven yields plumb depths
Here's my summary of the key news overnight in 90 seconds at 9 am, including news that fears of a Euro-zone breakup deepened overnight with signs of renewed capital capital flight from Southern Europe to safe havens all over the world.
The Spanish 10 year bond yield, a key measure of fear about a euro-zone breakup, rose to a record high 7.63% overnight. Italy's 10 year bond yield rose to 6.63%. See more here at Bloomberg.
Investors are pulling their money out of Spanish and Italian bonds and putting them either into Northern Europe, America and even into Australasia because they worry their euros will be devalued into pasetas and liras in any break-up. Fears of a Greek exit have returned in recent days as officials say Greece is behind its austerity targets and various Germany politicians are saying they are relaxed about Greece leaving the euro. See more here at Reuters.
However, Moody's reminded investors that a Greek exit and a Spanish bailout would not be painless for Germany, the Netherlands and Luxemboug. Moody's warned it may downgrade its AAA ratings on the Northern Europeans' bonds because of the potential costs of more bailouts. Crisis meetings were held overnight between Spanish and German officials about how to help Spain overcome its punishingly high borrowing costs. See more here at Bloomberg.
The US 2 year bond yield fell to a record low 0.22% after the second highest demand in an Treasury auction ever. The US 10 year yield fell to 1.39% as investors ignored the record low yields and opted for an asset they believed would preserve their capital rather than generate a return. See more here at Bloomberg.
International investors are also buying Australian and New Zealand bonds, pushing their yields to record low levels of 2.76% and 3.27%.
European stocks fell as much as 1% and the Dow closed down 0.8% on signs a synchronised slowdown would hurt company profits. See more here at Bloomberg.
Apple surprised investors after the US market closed at 8 am NZ time with a weaker than expected result. Apple shares fell 5% in after hours trade. See more here at Reuters.
The New Zealand dollar dropped to 78.5 USc overnight, having edged over 79 USc late yesterday after Chinese factory output contracted less than expected. See more here in BNZ's currencies report on our site.
(Updated with more detail on US markets, Apple results and NZ$ moves.