September 13, 2011
Investors flooded into the safe arms of German bonds Monday, and European banks dialed back lending to their riskier peers, in a clear sign that fears of a destabilizing collapse in Greece persist despite fresh efforts over the weekend to shore up the troubled country's finances.
The alarm sounded across Europe's beleaguered periphery. Early in the day, Italy paid a steep price to issue short-term treasury bills, borrowing for three months at the same rate the U.S. commands for 10 years.
Bond yields in Spain and Portugal rose, too. Greek bonds were at panic levels: more than 20% for 10-year lending and 75% for two, though few buyers were willing to take the plunge.
German government-bond yields meanwhile fell to record lows—1.72% for 10-year bonds—as investors sought the security of the Continent's strongest economy.
Journal Community
The action was a disquieting response to a furious bid by Greece to raise fresh cash. Sunday, the country's finance minister outlined a plan to cover a €2 billion ($2.73 billion) shortfall with a special property tax—to be collected on property owners' electric bills, the better to be assured it is actually paid.
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