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Investors Are Relatively Calm over Greece

By Chris Lowe, Editor-at-Large on June 29, 2015

Investors in European assets are holding their nerve…

So far at least, there’s no sign of outright panic over a Greek debt default.

The euro has fallen 0.4% versus the dollar since Friday’s close. At writing, one euro buys $1.11.

But that’s still above the euro’s low against the dollar of $1.05 reached in March.

And there’s little sign that bondholders in other highly indebted European countries see much risk of contagion from a Greek default.

In 2012, the last time the European sovereign debt crisis was in full swing, yields on Spanish 10-year debt peaked at 7.6%… yields on Italian 10-year debt peaked at 6.6%… and yields on Portuguese 10-year debt peaked at 17.4%.

Yields move in the opposite direction to bond prices. A spike in yields shows that investors are becoming worried that the value of the bonds they are holding will fall.

And in the case of bonds of the so-called “PIGS” – Portugal, Italy, Greece, and Spain – those worries center on the risk of governments in those countries defaulting.

chart_062915

But, as you can see from the table above, with the exception of Greece, European bond yields are nowhere near crisis levels.

For now, at least, bondholders don’t see the problems in Greece spreading to other European nations.

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