European Bond Spreads Remain Contained

The eurozone's major economies have seen their bond spreads remain relatively stable, despite Italy's political turmoil and renewed concerns about Spain. The bund spreads between Italy and German remain near March 2012 lows, while spreads between Spain and Germany are also trading down sharply from their highs in July through September 2012.

These trends could rapidly change after Italian Prime Minister Mario Monti indicated that he will resign in early 2013. With his competition far more anti-German, the move could disrupt the fragile financial ecosystem that Germany has helped pioneer to help countries like Italy and Spain get back on track financially.