No news is bad news

The unsettling curiosity of the current spike in Spanish sovereign yields is that it does not appear to be news driven. In fact, the babble in the noise-o-sphere, by no means yet verging on flattery, recently seems to have it that maybe Spain is being keelhauled by events that are neither within its control nor are its responsibility, The question here is that if news is not driving bond prices down, can we expect other news to revive it? We suspect that George Papandreou's declaration, and then withdrawal, of the Greek referendum proposal was the end of the line in that regard. Shame he backed down, say we.

The instigator of all this, in our opinion, might be the ideological structure of the European Union itself. Just as Malta and Germany each have one vote on EU matters, the Union itself is underpinned by a philosophy that it will not be permitted that any country lose from the deal. There is more than a passing similarity to the paradox of thrift in all this.

One interviewee (we can't remember where) noted that a miniscule 10 million euro sell order for a given Spanish government bond is currently capable of moving the price four basis points. If the cause of all this volatility is a buyers' strike, as the above indicates, then there is no reason for us to believe it will end until the EU comes out and makes a choice.

Has anyone failed to notice, by the way, that there are now two European nations being led by non-elected officials?

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