Having somehow believed that given just a little more time eurozone leaders would resolve the ongoing sovereign debt saga, it seems investors are now finally losing hope that a solution will be found.
After two years of official statements, political rhetoric and failed summits, bond investors are now beginning to demand higher rates of return in exchange for holding increasingly risky eurozone government bonds. On Tuesday night the Eurozone bond markets suffered a mass sell-off which saw investor’s fears spread beyond the peripheral nations of Italy and Spain to the AAA-rated countries at Europe’s core.
Those willing to lend to France, Austria, Finland and the Netherlands are all demanding more compensation and Europe’s bond auctions are not over yet. Between now and the end of the year European nations will attempt to auction around €255 billion.
I expect that this is the start of a long-term trend and it’s one that’s long overdue.