Bond yields are spiking up again. The biggest risk to risk-on trade which started in the beginning of the year is the coming back of eurozone crisis. Apart from higher bond yields in Spain & Portugal, market is also worried about out election outcome in France which could probably bring in the leftist Hollande in power undermining the very fragile fiscal pact between euro area countries. The Dutch government is split with the leadership finding it diffficult to push austerity measures within the colaition members
ECB has so far desisted from making fresh intervention in the bond market. However, the cries for another round of bond buying are getting stronger every day. US treasury secretary Geithner has already suggested ECB to get active in the market again. The macroeconomic data coming out of europe continues to disappoint with spain entering a recesssion in Q2 this year. Also, european manafacturing PMI continues to drop and shows no sign of settling down.
The stability of the global financial markets depends upon how quickly ECB intervenes.........
