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.