Forget Stocks, Look At EU Bonds – They Are The Real Problem, by Tom Luongo

European bonds may be the biggest central bank-blown bubble in the world. From Tom Luongo at

I’ve been banging on for months along with Martin Armstrong that the real problemoverhanging these markets is not an over-priced U.S. equity market.  That’s a sympton of a much bigger problem.

The real problem is an over-valued European sovereign bond market.

Looking at today’s bond market we see technical breakouts on yields to the upside across the continent.  And we’re not talking the usual suspects here, like Italy, Portugal or Greece.

No, we’re talking about Germany.


Note the cluster of resistance at 0.5%.  The market rejected taking yields on German 10 year debt above that level no less than six times in the past fifteen months.

Today, yields are at 0.685% and tomorrow is the end of the month.  Looks like we’re going to get a major bearish signal in German debt tomorrow.

While all the headlines are agog with stories about the Dow Jones dropping a couple hundreds points off an all-time high, German bunds are getting killed right before our eyes.

The Dow is simply a market overdue for a meaningful correction in a primary bull market.  And it’s a primary bull market brought on by a slow-moving sovereign debt crisis that will engulf Europe.

It’s not the end of the story.  Hell, the Dow isn’t even a major character in the story.

In fact, similar stories are being written in French 10 year debt, Dutch 10 year debt, and Swiss 10 year debt. These are the safe-havens in the European sovereign debt markets.

Meanwhile, Italian 10 year debt?  Still range-bound.  Portuguese 10 year debt?  Near all-time high prices.  The same this is there with Spain’s debt.  All volatility stamped out.


Simple.  The ECB.

To continue reading: Forget Stocks, Look At EU Bonds – They Are The Real Problem

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