Markets Stabilizes but Tensions Remain High
Spanish 10-years yields continue to rise above those of Italy, and suggest that Spain may be the next country in the hot seat. Data released today confirms that the contraction in Spanish industrial production is still ongoing, with January IP falling -4.2% y/y compared with a decline of -3.5% in December. The spread between the two country’s bonds are now at 13 bp, a level not seen since August 2011, and up from a low of -202 bp in at the start of the year. In other news, ADP data today may offer some clues about Friday’s jobs report, but we suspect both reports will be overshadowed by euro zone concerns.