German Curve Reveals Woes Masked by Spanish Rally: Euro Credit

The widening yield gap between 10-and 30-year German government securities suggests recent gains in Spanish and Italian bonds may prove unsustainable.

The spread, a measure of risk perceptions among bondholders, rose to 97.5 basis points on April 4, the most since September 2011, as 10-year yields plunged. The steepening yield curve suggests investors are favoring Europe’s safest fixed-income assets as Italy awaits a government seven weeks after elections and the bank crisis in Cyprus stokes concern the region’s debt crisis may worsen.