Bond Yields and Euro Full of Jitters as Greece’s Problems Spread

With heightened fears that Greece’s crisis is spreading, the euro continues to decline and Italian and Portuguese bond yields are skyrocketing.

At one point, the euro dropped as low as $1.3837, its lowest valuation since March 11, and was up to $1.4015 as of 8:50 a.m. EST Tuesday morning. Italy’s 10-year bond yield has jumped 40 points in the last two days, rising to 6% at one point, the highest it’s been since 1997, but then slipping down to 5.74%. Meanwhile, the 10-year Treasury yield fell 6 basis points to 2.86%, and the chance of Greece defaulting within the next five years rose to an estimated 87%.

The Irish 10-year note rose 21 basis points to reach pre-euro levels, but the Spanish yield on the 10-year note barely moved and Greece’s 10-year yield dropped 22 basis points, but only after rising earlier. The Germany bund yield dropped 7 basis points, as it continues its decline.

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Italy (NYSE:EWI) sold 6.75 billion euros of treasury bills at auction, with one-year bills at an average yield of 3.67%. The last time the Treasury sold similar securities was on June 10, when the yield was as low as 2.147%. Lower demand for debt is to blame for the increasing bond yields. Greece also auctioned off securities, selling 1.625 billion euros of 182-day bills. And today the U.S. will sell $32 billion of 3-year notes, the first of three offerings that will total $66 billion.

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