The yield on ten year German Bunds rose by around 30bp in June, despite the fact that the yield on ten year US Treasuries barely increased. The rise in the ten year Bund yield may have partly reflected an unwinding of safe haven flows in response to growing optimism that policymakers are finally getting to grips with the crisis in the euro-zone. After all, ten year government bond yields in Spain, Italy and Portugal all ended a turbulent month significantly lower in the wake of the measures announced at the latest EU Summit. However, the rise in the ten year Bund yield could also reflect unease about the prospect of greater burden sharing within the euro-zone, which would undermine Germany’s own credit standing.
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