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Surging French Bond Yields An Omen Of Euro Turmoil To Come

Thursday, February 23, 2017 4:43
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From Larry Edelson: Investors see the writing on the wall. And that’s why they’re fleeing French 10-year government debt: They purged $32 billion worth in the fourth quarter of 2016 and even more in recent weeks.

And that’s pushed French yields through the roof.

In fact, if you compare French yields to German bunds, you can’t miss that the difference between the two is quickly approaching levels not seen since the last sovereign debt crisis …

As this chart clearly shows, the surge in French yields compared to German bunds is at its highest level since 2012.

And the higher yield differential comes in the face of better-than-expected French economic readings.

Reason? Sluggish economic growth and mounting debt have already left many countries in the eurozone on the brink of economic and political collapse.

And the French debacle is just the latest installment in the growing sovereign debt crisis.

Another concern weighing over French government debt – and that of other European nations – is the European Central Bank’s plan to slow monthly bond purchases by 25% in April.

This means less government support of lousy debt.

Other eurozone countries on the brink include Italy, Portugal and Greece: Their bad debts are weighing on bank balance sheets like a lead balloon.

  • Greece is already bankrupt, with 79% more money going out every year than every man, woman and child in Greece can earn.
  • Italy’s banking system is on the brink of collapse, owing 32% more than GDP. Portugal’s not far behind at 30%.
  • How about Spain? The entire population of that nation would have to fork over ALL of their annual income in taxes just for the government to break even.

You read that right: Fork over all of their income!

These are just a few examples of eurozone countries owing MORE than their people and businesses can produce.

Now, throw in Brexit and Prime Minister May’s insistence to leave the EU and you have a recipe for disaster.

And don’t forget: This year’s upcoming elections are liable to put the region into an even bigger tailspin.

It’s all part of the sovereign debt crisis that I’ve been warning you about.

And that’s why I recommend you dump investments that are tied to the euro before it’s too late.

The iShares MSCI France Index ETF (NYSE:EWQ) was unchanged in premarket trading Thursday. Year-to-date, EWQ has gained 1.50%, versus a 5.70% rise in the benchmark S&P 500 index during the same period.

EWQ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #21 of 91 ETFs in the European Equities ETFs category.

This article is brought to you courtesy of The Edelson Wave.

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