European Bonds Suffer the Most as Investors Fret About Energy and Elections
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High-yield spreads have fallen to just 2.66% above US Treasuries—close to their tightest level in years and roughly half the historical average. That leaves almost no margin for error. Yet the labor market is slowing, fiscal deficits remain near 6% of GDP, and economic risks are building. Credit markets often crack before equities notice. At a 2.66% spread, investors are receiving very little compensation for default and liquidity risk. If spreads widen, financial conditions could tighten quickly—and stocks may feel the impact soon after. Source: Kurt S. Altrichter, CRPS®
This week alone carries up to $14.5 BILLION in capacity, with the program doubling in size on September 9. The 30-year yield sits near a 20-year high, with the government now spending over $1 TRILLION a year just on interest. Treasury Secretary Bessent insists the goal is liquidity, not controlling yields, saying "I have not bought anything yet." Source: coinbureau
The country’s one-year forward power price has surged to €122/MWh—its highest level since 2023. This matters because the contract is a key benchmark for the procurement costs faced by household electricity suppliers. The main culprit? Surging natural gas prices. Under Europe’s merit-order system, the most expensive power plant required to meet demand sets the wholesale electricity price. And that plant is often gas-fired. So even when most electricity comes from cheaper sources, rising gas prices can lift the cost of the entire power market. The result: renewed pressure on households, businesses and Germany’s industrial competitiveness. Source: HolgerZ, Bloomberg

