These were the yields and basis point movements of some of the most watched 10 year bonds just before the close in Europe:

Spain: 5.99% (+21bp)
Italy: 5.10% (+9bp)
France: 2.29% (+2bp)
Germany: 1.68% (-3bp)
UK: 1.92% (-4bp)
USA: 1.83% (-4bp)

It was return to the bad old days in the bond market on Monday as concerns over Spanish debts and EU banking supervision saw investors buying the less risky securities of the US, UK and Germany.

EU finance minister failed to agree to changes to the powers of the European Central Bank at a meeting in Cyprus at the end of last week. This is seen as an important step to avoiding the catastrophic losses suffered by the Spanish banking sector.

Another factor putting investors on edge is the fact Spain has yet to make a formal request for assistance from the European Central Bank (ECB). The move, which would see the ECB enter the secondary market to keep down the cost of borrowing for Spain would also entail strict budget conditions that the Spanish government is loathe to accept.

Investors have been expecting Spain to bite the bullet for several weeks, but Madrid has so far resisted the political and economic pressure to press the help button.

Until it does, the market will continue to seek safety.

BS

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