Trading Post.
Is eurozone headline risk becoming asymmetric?
It’s an ugly piece of jargon but in recent days it is the question some in the market have been posing. It refers to the view that traders may be reacting positively to news deemed “eurozone supportive” but quickly putting “eurozone negative” factors behind them.
In market terms, it means many of the bad scenarios – Greek default, French downgrade – may have been discounted, at least partly. Or, more simply still, it means “crisis fatigue”.
If true – and it’s a big if – this has implications for the broad financial asset universe, so beholden have they been to eurozone titbits. And it may leave havens particularly vulnerable should investors become bolder.
One of those is the German Bund. Ten-year yields of 1.80 per cent remain within a dozen or so basis points of record lows. But it is noticeable they benefited little when Germany kept its triple A rating as Paris lost its triple A.
And the problem for Bunds is they may underperform if eurozone angst returns. Capital Economics sees benchmark yields at 3 per cent by the end of 2012, a function of credit risk as Berlin is seen to be taking the burden of the eurozone on its shoulders.
via Euro and stocks volatile on talk of IMF fundraising – FT.com.