Cracks are appearing in the European Union. The mammoth bail-out package for Greece and the European Central Banks buying of the bonds of Greece and other EU countries bought a few days of calm last week — but indicators of risk began creeping back upat the end of the week. They include:
- the euro dropped to $1.2354 (U.S.), breaking the prior weeks low
- Euro now down significantly from the $1.51 high (U.S.) in November
- traders paid94bpto swap euros for $compared to102bp just beforebail-out package
- LIBOR, the interest rate banks charge each other, rose to 0.45%, from 0.3% in April
- VIX(known as the fear gauge) posted its biggest one-day jump since 2008
- credit-default swaps rose to $611,000 to insure $10 million of Greekbonds.
Will the rise in risk aversion be a temporary blip or the start of something worse? I hope to have some posts on this and related topics later today and in ensuring days.