Panic Works, for now

Bond markets are like Pam Anderson. Over sized, over worked, inane and mildly diseased; all heads still turn when they move. Yesterday, as reality once again seeped into the land mass formerly known as Europe, the far more important- and sexier- short end made the history books.

The German Schatz (great name) yield fell to  9 bp briefly entering the Japan no-fly zone (Japan approx 11). Unable to snap supply to the mortified buyers on Tuesday, the Germans sold a 10 year today. A brief respite from freaking out brought yields from 1.70 to 1.77 and only 4.1B euros of the scheduled 5 was placed. US notes cracking 2% hardly seems unreasonable by comparison. The problems of others have been a boon for US and German government financing. Italy, for example, sold year Bills at 2.84% - double the yield of the March 13 auction. 10 year yields are just year rates extrapolated into the future. Viewed without emotion, bonds (and Pam Anderson) turn far fewer heads.

We'll let you in on a little secret - Italy is not Germany. Differentiation is good. Greece blew up because it was able to borrow large sums of money as if it were Germany, its not.

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