New York Times
July 18, 2010
Just two months ago, Europe’s sovereign debt problems seemed grave enough to imperil the global economic recovery. Now, at least some investors are treating it as the crisis that wasn’t.
Spain held an auction of 15-year bonds last week that went off without a hitch, raising 3 billion euros, or about $3.8 billion, at a relatively favorable interest rate of 5.116 percent. That was up from 4.434 percent on a debt sale in late April, though the latest one was far more heavily subscribed.
Also last week, Moody’s Investors Service downgraded Portugal’s credit by two notches, citing the nation’s debt burden and poor growth prospects, a sign that the country’s underlying problems are not over. Yet investors, rather than punish assets linked to Portugal’s economy, seemed to take the news in stride.
Nations like Spain, Portugal and Greece had been cautious about holding big debt auctions as recently as last spring. Then, weak demand would almost certainly rattle global markets on fears that European nations would have trouble raising new money to cover their groaning debts. Investors were quick to sell on the mere hint of a credit downgrade.
How quickly investor psychology has changed.
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