The Corner

Imperfect Union

The flight away from the periphery continues.

Via Bloomberg (my emphasis added):

Denmark’s central bank cut its main borrowing costs to record lows and brought the rate it offers on certificates of deposit below zero, as policy makers test uncharted territory to fight a capital influx.  The benchmark lending rate was cut to 0.2 percent from 0.45 percent, while the deposit rate was reduced to minus 0.2 percent from 0.05 percent, Copenhagen-based Nationalbanken said in a statement today. The move followed a quarter of a percentage point cut in the European Central Bank’s main rate to 0.75 percent. Nationalbanken doesn’t hold scheduled meetings and only adjusts rates to defend the krone’s peg to the euro.

Via Reuters:

The Spanish Treasury paid the highest rate in over seven months to borrow 10-year funds, suggesting the positive effect of last weekend’s agreement by euro zone leaders is wearing off.

That didn’t take long.

Altogether, Madrid auctioned 3 billion euros ($3.75 billion) in three maturities of bonds. It sold 747 million euros in the benchmark 10-year bonds at an average yield of 6.43 percent, up from 6.044 percent at the last such auction on June 7.

There’s no great science to it, but 7 percent is usually thought to be “unsustainable”.

One bright spot:

…Ireland said foreign investors had backed its return to short-term debt markets on Thursday. In a tentative first step following a nearly two-year hiatus, Ireland sold 500 million euros of treasury bills at an average yield of 1.8 percent. It said it hoped to return to long-term debt markets with a syndicated issue later this year or early next year at a maturity of two years or more.

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