10-Year Treasury Yield Lowest Level in 60-Years; Spain 10-Year at 6.66%, Italy 10-Year 5.93%

Curve Watchers Anonymous is noting a record low yield on 10-Year US Treasury Notes.

click on chart for sharper image

The above chart shows the monthly close except for the current month. 

$IRX 3-month discount rate : Brown
$FVX 5-year treasury yield : Blue
$TNX 10-year treasury yield : Orange
$TYX 30-year treasury yield : Green


CNBC reports US 10-Year Treasury Yield Hits Record Low of 1.62%

The benchmark U.S. Treasury yield fell to its lowest level in at least 60 years on Wednesday as worries of contagion from Spain's ailing banks raised bids for low-risk investments.

Yields on 10-year notes sank to a record low of 1.62 percent, down sharply from 1.73 percent in late U.S trading on Tuesday.

The 30-year bond yield fell to 2.71 percent, its lowest level since October, and down from a yield of 2.84 percent in late U.S. trade on Tuesday.

Spain Record High Spread to Germany

Spain 10-year bond yield hit 6.7%, a record spread vs. Germany, before settling at 6.66%.

Italy 10-year bond yield hit 6.01% then settled at 5.93%.

Yield on the 10-year German bond hit a record low of 1.27%.

 Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Good News in Wisconsin: Governor Walker Leads Barrett 52%-45% in Recall Poll; Union-Busting is a "Godsend"

I have good news to report in Wisconsin. 

The recall election for Republican governor Scott Walker will take place on June 7. Polls show Walker Leads Barrett 52%-45%.

Wisconsin Republican Governor Scott Walker leads Democratic Milwaukee Mayor Tom Barrett by 7 percentage points in the state’s June 5 recall election.

Walker widened his edge over Barrett, 52 percent to 45 percent, in a replay of the 2010 governor’s race, according to the poll released today by Milwaukee’s Marquette Law School. The school’s May 16 survey had Walker up 50 percent to 44 percent.

Walker, whose curbs on public-employee collective bargaining last year provoked the recall campaign, received a 51 percent approval rating while 46 percent disapproved. Next week’s vote is only the third ouster election of a state chief executive in U.S. history.

Union-Busting is a "Godsend"

I commend governor Walker for killing collective bargaining of some public union workers in Wisconsin. Here are the results of Walker's efforts:

• Taxpayers are better off.
• School kids are better off
• Class sizes are down
• Struggling school districts now have a budget surplus

For details, please see Union-Busting is a "Godsend"; Elimination of Collective Bargaining is the Single Best Thing one Can do for School Kids

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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EU Throws Spain Two Deathlines; Spanish 10-Year Yield Tops 6.7%; ECB Rejects Madrid Ponzi Refinancing Scheme

ECB Rejects Madrid Ponzi Refinancing Scheme

The markets are reeling in the wake of rejection of Spain's Ponzi Recapitalization Scheme by the ECB according to the Financial Times.

A Spanish plan to recapitalise Bankia, the troubled lender, by indirectly tapping the European Central Bank for cash, was bluntly rejected as unacceptable by the ECB, European officials said.

Madrid had floated the unorthodox idea over the weekend of recapitalising Bankia by injecting €19bn of sovereign bonds into its parent company, which could then be swapped for cash at the ECB’s three-month refinancing window, avoiding the need to raise the money on bond markets.

The ECB told Madrid that a proper capital injection was needed for Bankia and its plans were in danger of breaching an EU ban on “monetary financing,” or central bank funding of governments, according to two European officials.

The ECB’s rebuff appeared to toughen Madrid’s insistence that the only solution to a crisis that is pushing its borrowing costs close to unsustainable levels is for the ECB to become a government lender of last resort.

Senior government officials in Madrid argue that bailouts in Portugal, Greece and Ireland have been catastrophic and Spain will not compromise on its refusal to accept a similar form of intervention.

Lifeline or Deathline?

Reuters reports EU throws Spain two potential lifelines

The European Commission threw Spain, the latest frontline in Europe's debt war, two potential lifelines on Wednesday, offering more time to reduce its budget deficit and direct aid from a euro zone rescue fund to recapitalize distressed banks.

EU Economic and Monetary Affairs Commissioner Olli Rehn said Brussels was ready to give Spain an extra year until 2014 to bring its deficit down to the EU limit of 3 percent of gross domestic product if Madrid presents a solid two-year budget plan for 2013-14, something it has committed to do.

Commission President Jose Manuel Barroso said tighter euro zone integration could include a joint bank deposit guarantee scheme to prevent a bank run and euro area financial supervision, saying the mood had changed since member states unanimously rejected a joint deposit guarantee fund only months ago.

"In the same vein, to sever the link between banks and the sovereigns, direct recapitalization by the ESM (European Stability Mechanism) might be envisaged," the report said.

Permitting the ESM to lend directly to banks would require a change to a treaty in the midst of ratification by member states that might come too late for Spain's needs. Spanish premier Mariano Rajoy backs the idea but Rehn appeared cool to it.

"Direct disbursements to banks are not foreseen as such in the treaty, and therefore this is not an available option ... in terms of direct recapitalization," Rehn told reporters.

I have no clue how Reuters came up with the title of lifelines. One proposal is impossible because it involves treaty changes. The other proposal, higher taxes and more austerity measures, looks like a deathline.

Spanish unemployment is at 24.1% and rising and youth unemployment is 51%. Spain's Revised Budget Deficit is 8.9% and rising not shrinking.

To go from 9% to 3% how many more jobs will have to go? What will happen to tax receipts? What will happen to prime minister Rajoy if he puts such a program in place?

Rajoy knows he cannot implement such an offer, and the ECB cannot or will not do what Spain wants.

The bond market reflects this shift. Yield on the 10-year Spanish government bond is up 21 basis points today to 6.65%, having touched the record high of 6.7%.

The only solution to this mess is Spain leaving the Eurozone. Please see Spexit Before Grexit? Six Reasons Spain Will Leave the Euro First for further discussion.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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