Worst January on Record for EU Bonds

You read that right: Last month was the worst start to a year on record for European bonds.

EU bonds from Germany to Greece saw yields surge and prices fall, amid an increase in support for anti-euro rhetoric and rising populism.

Overall, Euro-area sovereign debt handed investors a 2.1 percent loss in January. That’s a heck of a loss in a single month.

Adding more downward pressure: Expectations that the European Central Bank’s (ECB) quantitative easing will come to an end soon is making investors nervous to be holding onto EU debt.

But this shouldn’t come as a surprise to any of you who have been reading my Edelson Wave column with regularity: The fact is I’ve been warning about the looming sovereign debt crisis for years. And now the bond bust is starting to unfold.

The rise in European government bond yields has been widespread since hitting recent lows in early fall of last year, led first by Italy and now France. And Greece is a total disaster with yields on Greek 2-year notes nearing 10%.

Greece continues to fight with the International Monetary Fund (IMF), which has refused to sign on to the aid program unless EU authorities grant further debt relief to Greece.

European bond traders suffered a bloodbath as political fears triggered selloffs.

But the EU leadership is balking: German Finance Minister Wolfgang Schäuble went on TV last week saying the only way Greece can get relief is if it leaves the Eurozone.

Now, the IMF is due to deliver a major decision on whether it will contribute to the country’s 86-billion-euro bailout when finance ministers meet in Brussels later this month.

Greece is small potatoes, especially when compared with the political uncertainty looming ahead of the general elections scheduled in France, Germany and the Netherlands later this year. All told, these elections have investors nervous, very nervous.

Take France, for example …

We are now about three months away from the final round of France’s presidential election. And investors are concerned about the strong showing of far-right candidate Marine Le Pen, who has promised to take France out of the Eurozone and to hold a referendum on European Union membership.

And I don’t have to tell you: If Le Pen wins, the euro is toast.

Bottom line: Europe was doomed from the outset. The EU leadership has done everything in its power to prop up bonds prices, but the end is near. We’re now heading into the early stages of a sovereign debt crisis.

Best Wishes,

Larry

Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader. Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

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Comments 17

S February 13, 2017

Larry, Thanks for your macro view and insights. A bit more detail on market moves, tops, bottoms, etc. would be extremely helpful. Otherwise I, as well as others, are holding gold, silver, nat gas, etc, at wrong prices and missing out on other stock movements. A weekly summary or text update on gold would be reassuring.

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Mick Hurlburt February 13, 2017

Mr. Eldeson, For some time you have stated that the dow was going to have correction before it takes off again. Do you still believe that as I have missed an opportunity if that is not the case.

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Lloyd Amundson February 13, 2017

You have said if we belong to your reports ( I do) we should have the ability to survive the K wave- I don't!

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Ken February 13, 2017

Will the French be able to get out from the EU any faster than the UK?

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Peter February 13, 2017

If the stock markets goes on a 15% to 30% percent correct, will all equities suffer or will mining stock survive?

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F151 February 13, 2017

Go Le Pen.

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Mark McMullan February 13, 2017

I would like to provide a counter balanced view to the criticisms of the EU. Originally, I grew up in Northern Ireland and thanks to the EU's free movement agreement, I have lived and worked in London, The Netherlands, Germany and Luxembourg. I now live in a beautiful, idealistic fishing village in The Algarves in Southern Portugal. Sounds impressive, but by comparison, an American would not be all that impressed by someone who had moved around New York, L.A. and Florida. My point is that by coming together the EU countries have provided a great place to live and work and do business with a combined GDP 2nd to the US, and ahead of China. Although, I have agree with Larry's criticisms of the EU, I hope the EU will improve and stay together. Unfortunately, I never got the opportunity to work and live in the US. I applied twice but was blocked out due to visa restrictions - such a shame. regards, Mark McMullan.

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Thomas Clawson February 13, 2017

Larry, I have wondered what to expect when the currency collapse of the free world takes place and then a third world war starts how can we afford to defend ourselves, let alone other countries having treaties with the U.S.. If you are correct, it appears that both situations could take place.

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Thomas Clawson February 13, 2017

I really don't expect an answer to my previous question but you have to see the serious conundrum it presents.

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JEFF JAMIESON (FROM AUSTRALIA) February 13, 2017

Larry You appear to be missing in action in respect of you open market predictions . Equity markets appear to be holding up against your topping out prediction over the last three months. No recent open commentary on gold or silver which has moved up a bit . Are you having to adjust your predictive modelling for the Trump factor?

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joe silvia February 13, 2017

great article Larry. Wen are us subscribers gonna get the short the euro reco's. keep up the great work. thanks

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Lois F. February 13, 2017

So Larry: what plans do you have for subscribers to benefit from the EU's troubles?

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Matt February 14, 2017

So what can people do I'm wondering about the poor are they just going to be left out to die I know our gov they will do what ever if it mean losing a few thousand to millions of family they will do it but what are family's to do is this why they have these female camps in every city so when people take to the streets to be arrested by our own military these guys we elect suppose to be smart but they keep screwing it up and then family's and the elderly suffers it isn't right they don't care most of them are rich the little guy always end up getting hurt and what about the disabled so many people to end up homeless and no money equals death thanks alot guys for ruining our country

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Matt February 14, 2017

Fema camps is what I meant to say I hate this correction on my phone you can type in one thing and it puts what it want

Dick Braatz February 14, 2017

Larry: On the Euro and European an US debt, once we go cashless and money goes dogital Central Banks and Govern will control all Money and the value and appearance (disappearance) of debt. Money will be created and vaporized with the click of a mouse. A .05% haircut or deposit tax on everyone or accounts greater than some amount won't be noticed. Market valuations will mean little since the Central Banks will have control (direct oversight) over all transactions. No freedom for market clearing transactions/contracts. Poof, debt no longer meaningful

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Jas February 15, 2017

How's this all gonna effect foreign sales corporations? The subsidiaries set up by US corporation to take advantage of partial exemption from US tax laws. Could this lead to the rekindling of the Bretton Woods system. The gold exchange standard that operated from the end of World War 2 until 1971. Could this possibly lead to a dollar glut. The excess supply of dollars in the hands of foreign monetary authorities that developed during the late 1950s and early 1960s.

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Brent Dickey February 15, 2017

I tend to agree with Larry's short and longer-term market views. That said, I understand that room for multiple perspectives exists. However they can be quite confusing when they present themselves back-to-back from the same firm, in spite of being from distinct individuals. I recently received a Weiss recommendation to join a trading service from an individual who contends the price of oil will surge to $100.00 per barrel, (I believe over the course of 2017). The individual may be correct, or may not. My quandary is where to place my trust.

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