Spain Gives the World the Jitters
- May 31, 2012
Events in Europe continued to make investors (and a lot of other people) nervous on Wednesday. In particular, Spain’s cost of borrowing spiked after the country’s central banker said that the government is going to miss its deficit targets this year. That drove Spanish 10-year debt yields above 6.7 percent, which isn’t considered sustainable even in the not-too-long run.
Spain, in other words, seems to be on an express train to bailout-town, but who’s got any money to give them? (Hint: The country that has really good beer.) But it isn’t clear yet whether German taxpayers can be persuaded to help out Spain or its sickly banks, whatever the consequences for the euro.
Lemming-like, investors sought out German bonds on Wednesday, pushing their yields down. In fact, the spread between German and Spanish debt at the end of the day on Wednesday was about 543 points, the widest it’s been since the introduction of the euro. Investors who want to be shed of Europe all together ran to U.S. debt, pushing 10-year Treasuries to 1.62 percent, their lowest yield in decades (in maybe 60 years, though official daily yield records only go back to 1962).
Foreclosures hold steady in April
CoreLogic reported on Wednesday that there were about 66,000 completed foreclosures in the United States in April. That compares with the same number last month, but about 78,000 in April 2011. In CoreLogic’s calculations, a “completed foreclosure” means a lost house.
A surge in foreclosures—now that a robosigning settlement has been made–has been expected for a few months, but so far it hasn’t happened, though there’s been an uptick in short sales lately. In any case, the magnitude of U.S. housing pain is revealed by other numbers that CoreLogic has compiled: since the Panic of 2008 (in September that year), there have been about 3.6 million completed foreclosures nationwide.
“There were more than 830,000 completed foreclosures over the past year, or one completed foreclosure for every 622 mortgaged homes,” Mark Fleming, chief economist for CoreLogic, noted in a press statement. “Non-judicial foreclosure markets, like Nevada, Arizona and California, completed two-and-a-half times as many foreclosures over the past year as judicial foreclosure states.”
Pending home sale slide in April
After an uptick in March, the National Association of Realtors’ Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 5.5 percent to 95.5 from a downwardly revised 101.1. However, the index is still 14.4 percent above April 2011, when it was 83.5.
Always eager to put the best face on things, NAR chief economist Lawrence Yun said in a press statement that a one-month setback doesn’t change fundamentally improving housing market conditions. “Home contract activity has been above year-ago levels now for 12 consecutive months,” Yun said. “The housing recovery momentum continues.”
After a heady up day on Tuesday, Wall Street took it all back and more on Wednesday’s euro-worries. The Dow Jones Industrial Average lost 160.83 points, or 1.28 percent, while the S&P 500 was down 1.43 percent and the Nasdaq declined 1.17 percent.