Is There Anything in Europe Worth Buying?
BOSTON (TheStreet) -- After a disastrous failed bond auction in Germany, investors need to ask themselves whether anything related to Europe is worth buying now.
The surprisingly poor auction of German bunds saw the sales target missed by 35% on weak demand, an extremely wide margin considering Germany's triple-A rating from credit ratings agencies. Already, yields on the 10-year German bunds have increased from the 1.98% at auction to above 2%, a sign investors are dumping those bonds at a fast rate.
|German Prime Minister Angela Merkel|
Unfortunately, Germany's failed bond auction was only a part of the bad news beclouding European countries Wednesday. Fitch Ratings is now warning that France may lose its triple-A rating because it can't handle any more shocks. Meanwhile, eurozone industrial orders fell in September by the biggest amount since December 2008. Belgium and France are now in disagreement over financial support for failed lender Dexia.>> 'Last Days of the Euro' Are Upon Us Even Goldman Sachs analysts, who had been expecting improvements from new governments in Italy, Spain and Greece, threw in the towel on their Nov. 11 recommendation to go long the euro. While the analysts viewed that the nomination of "technocrat-led" governments in Italy and Greece could lead to a clear reduction in risk aversion, "this has failed to materialize -- even after the reform-friendly election outcome in Spain." The failed German bond auction is what has really spooked investors ahead of the Thanksgiving holiday. European markets fell by nearly 1% Wednesday while the yields on 10-year bonds in Germany, France, Italy, Spain, Netherlands and Switzerland climbed. If investors aren't willing to buy bonds from a triple-A rated country like Germany, they're hard-pressed to find anything safer and worth the risk. The debt contagion appears to have gotten so big it will swallow the entire Continent. No country is safe anymore, not even Germany. "I hate to use clichés, but this is the straw that broke the camel's back," says Michael Pento, president of Pento Portfolio Strategies. "If we assume this is indicative of the appetite of the most safe sovereign country in Europe, this is a complete disaster. It's a failed auction by definition. If you don't want to buy the safest investments in the safest country in Europe, what else is safe?"
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