The PIIGS Get Slaughtered in Europe

The sun has set on Europe.

And not a moment too soon. If not for the close of markets today, things might have become even uglier.

The 10-year bonds issued by Spain and Italy fell dramatically today, to the lowest levels since the single currency was introduced into the European Union.

The yield on the 10-year Italian bond increased to 6.04 percent, according to Reuters. That’s the highest level seen since the monetary union took hold. Bond yields move in the opposite direction of prices, rising when investors are selling the bonds.

Spanish 10-year yields rose to 6.38 percent, according to Reuters.

Seven percent is widely perceived as the level at which funding costs are unsustainable. Spain is certainly coming uncomfortably close to that limit.

European finance ministers continue to negotiate over a rescue for Greece, whose two-year bonds are now yielding an astronomical 35.98 percent.

But credit market fears have quite clearly now gone way beyond whether Athens will default. It’s now all the so-called PIIGS countries—Portugal, Italy, Ireland, Greece and Spain—that are under pressure.

The two-year notes of Ireland are yielding 23.31 percent, according to figures from Bloomberg. Portugal’s are up at 20.34 percent.

At one point today, false rumors circulated that trading had been halted in Italian bank stocks. Then the rumor was that trading in Italian government bonds was halted. In fact, the stocks and bonds continued to trade. But the quick spread of the rumors underlined the nervousness of market participants.

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