About a week ago I was writing about how it was getting near that time for the politicians and central bankers to intervene. It all that smell about it of ‘Do something or this whole thing is going to blow’. I also wrote that I expected the positive market reaction to last a little less long than it has in the past (the LTRO news boosted the markets for all of about three months).
So the news on the bail-out for Spain was duly announced today amid shouts of ‘Victory for the euro’ from Mr Rajoy and others, and the market’s reaction…..Well, it’s flat after a euphoric 1.5% rise first thing today, but a) watch the currencies and b) of course, watch the Spanish (and Italian, and French) 10 year bond yields. The euro is 1% weaker today against both the pound and the dollar, and Spanish bond yields, far from falling in the wake of the €100 billion rescue, are up to 6.45% as I write. Sorted? Hardly, and that’s after throwing €100 billion at the problem. Over to the politicians and central bankers for more sticking plaster, fast.