Trouble Is Bonds, European Bonds

Update: The Dow has moved into positive territory in the noon hour; traders are citing reports that Italian Prime Minister designate Mario Monti will be able to form a new government .

Another lackluster equities trading session on light volume. The issues:

1) Traders do not believe that movement on the political front in Italy and Greece will not translate into fiscal and structural changes in those countries any time soon.

2) While equity markets are quiet again, bond markets are not: Spanish 10-yr yields are at the highs of the day, over 6.3 percent, knocking at historic highs. Italian 10-yr yields also back above 7 percent.

3) While retail sales were much better than expected in the U.S. (Morgan Stanley and Merrill Lynch both increased their Q4 GDP estimates), most are not sure that the gains will last into 2012. Merrill economists Michelle Meyer and Ethan Harris said "we expect consumer spending to slow considerably" in 2012, citing the withdrawal of fiscal stimulus, low savings, and slow job growth.

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