Hard to believe but a worsening euro debt crisis makes the U.S. look good this morning

07/28/2011 1:40 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Stop for a moment and say, “Thank you” to the continuing euro debt crisis.

Once again this morning the United States looks like the least worst alternative.

The dollar is up this morning against the euro and safe-haven buying has stabilized the short-end of the U.S. Treasury market.

Much of this good news for U.S.-dollar denominated assets stems from a terrible auction of Italian government bonds this morning. At the auction the Italian government sold only 7.97 billion euros in various maturities instead of the 8.5 billion euro target. The yield on the Italian 10-year bond climbed back near the 6% danger zone. (Interest rates of 6% on Italy’s debt are regarded as unsustainable and likely to trigger a crisis that would require yet another European rescue package.) The 10-year yield at auction this morning rose to 5.77%. That’s a huge jump from the 4.94% yield on Italian 10-year bonds at the last auction on June 28 and it returns the yield on Italian 10-year bonds to about where it was when European leaders put together the second Greek rescue package.

So suddenly the U.S. dollar and U.S. Treasuries look like safe havens again. The euro was down to $1.4307 at 11 a.m. New York time this morning, a drop of 0.43%. The price and thus the yield of the U.S. 3-month and 6-month Treasury bill were unchanged.

 

Related Articles on STOCKS