Seeking Alpha
February 10, 2011
Did you think it was over? Did you believe that the bailouts of Greece and Ireland had effectively put an end to the PIIGS challenge?
On a monthly momentum basis, Europe had been on a roll. And many market strategists had suggested that a fundamental shift from the macro-economic eurozone picture to the micro-economic attractiveness of European corporations would keep European ETFs on a hot streak.
Well ... not so fast. We may have seen Greece and Ireland tap the bailout funds. However, Portugal, Italy and Spain are still having a tough time finding buyers for their government-issued bonds.
Specifically, the European Central Bank had to engage in a bit of “quantitative easing,” after watching Portugal’s 10-year yield catapult to a euro-era high of 7.63%. Analysts believe that anything above 7% is unsustainable for Portugal. (Note: The ECB buying did move Portugal’s 10-year back down to 7.29%.)
Nevertheless, the ongoing uncertainty over the size and scope of the eurozone’s current bailout backing, not to mention Portugal’s current unwillingness to admit to needing any help, has caused investors to back away from European ETFs.
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