Fear in Markets

European Monday is full of disaster. Markets plunged. After Greece and Portugal, Italy and Spain rising yield is creating nervous situation.

The 10-year yield continued to push above the 5% level on Monday. Spain 10 yr bond yield almost around 5.64%.However, yields remain well below the 7% threshold that served as death knells for the ability of governments to tap credit markets to meet funding needs in these two countries. Spain and Italy are too big to be bailed out by the European Union. A Near-term solution will be the European Financial Stability Facility where the authority to buy government bonds in the secondary market

From US, debt concerns again mounting. The US president Barack Obama failed to strike a deal on raising the national debt limit to avoid defaulting on sovereign debt. Talks were held as Washington faced the possibility of defaulting on its debt. The current federal budget runs out on August 2. The Obama administration is hoping to work out an agreement with the Congressional leaders before July 22^nd. If an agreement is not reached on raising the debt ceiling by the August 2 deadline, the Obama administration faces the prospects of running out of finances to pay civil servants, government contractors, pensioners and holders of government debt bonds.