The core of the euro zone is being threatened now after a failed German government bond auction. The sale of 6 billion euros of 10-year government bonds attracted bids totaling around 3.9 billion euros. That left the Bundesbank to pick up the rest of them totaling 2.35 billion euros. Now this isn’t the first time German government bond auctions have come up short, but total bids exceeded the amount sold to bidders just 1.07 times. That is the lowest ratio since 1999. Plus with all the uncertainty around the other euro zone countries, Germany can’t appear weak right now.
Following these results, the euro fell to a month and a half low and is currently trading at 1.3361.
France is also in the news after French and Belgian bond yields rose on Wednesday. This occurred after a Beligian newspaper reported that the previously agreed bailout plan for Dexia was not working. Adding to France’s problems, Fitch Ratings said that France’s triple A rating will be in jeopardy if the ongoing euro zone crisis results in a steeper economic downturn for France.
Spain and Italy also continue to be problems so needless to say European leaders have their work cut out for them.