Rates are down again today, most entirely on Eurozone news. In short, the markets question (read, don’t believe) that Greece’s situation can be contained by the $145 billion guarantee. The length of time it took for (primarily) Germany to consummate this, caused scrutiny into the other surrounding nations, and drove their rates of interest higher. Although Spanish Prime Minister Jose Zapatero dismissed concerns of Spain following Greece as “complete madness”, Both Spain and Portugal are under the microscope to be downgraded in safety ratings. European Central Bank council member Axel Weber, who heads Germany’s Bundesbank, said Greece’s fiscal crisis is threatening “grave contagion effects” in the euro area. The market simply retains a significant concern.
Domestically, the economy is showing signs of a stronger recovery than expected; but the Euro news is significantly overriding this downward-pressuring news. (Downward to bond prices; upward to interest rates.) So, for the time being, rates are downward for the foreseeable near term.
The bounce that you saw this morning was likely related to an overbought position, and was a simple re-equilibrating of value. We’re likely to stay relatively where we are at this hour.
On the personal point of view, even though the economy is showing strong (“stronger than expected”) signs, don’t lose track of the reality that our fundamentals have significant challenges within them. I don’t believe that the Government is significantly manipulating the figures; but that possibility does exist. We are, unfortunately, in a political society these days, with self-preservation being a much higher goal than society-preservation.
On a troubling front for all of us, three people have now died in rioting in Athens, after fire was set to a bank. This, as the government institutes price cuts and severity measures, required by the EU community as a condition of the bailout (and as a condition of normal governmental fiscal prudence.) But protests have now led to murder by an unruly society.
As I’d said yesterday, in any budget, money comes in hard, and goes out easy. It’s easy to slip from the standard of fiscal prudence; and as you can see, very hard for the society to claw it’s way back. With regard to our own spending, we need to be highly prudent about our spending. –We’re on the track that Greece is walking.
