Daily Form February 21, 2011

Inter-market Technical Analysis using algorithmic pattern detection

MONDAY FEBRUARY 21, 2011       13:23:00 GMT

In view of the fact that today is a holiday in the US the commentary today will be brief, but I would like to draw attention to a recent piece which I have written which some readers may find interesting.

The tectonic plates of crisis within the Eurozone government debt market are rumbling again as the yields on Portuguese 5 year debt now seem to have established a foothold above 7% and the 10 year yield is currently at a record high above 7.5%.

As the three dimensional graphic below shows yields on the 10 year benchmark bonds for Germany, Spain, Portugal and Italy have all been on the rise during the last several weeks. In fact, notwithstanding the small drop in yields resulting from the Hamburg election result (see article reference below), German yields have moved up by more than 75 basis points since mid October of last year.

Particularly alarming is the rate now shown on the Portuguese 10 year which has a yield at the time of writing (Feb 21st) well above 7.5% and this is considered by most analysts to be above the critical level, and as such the Portuguese government will almost certainly have to turn to the EFSF for a bail out.

There is an extended article available at the following location which is entitled Macro Eurozone risk - we’re all in this together, aren’t we? which addresses some fundamental structural flaws in the EMU and its ability to withstand future sovereign debt crises.