The strategist also relativizes the situation

The gap was widening between the Germany and the rest of the euro area. With the financial crisis, the premium that the other 14 countries must pay from the German State to lift the debt markets has increased significantly. The European Commissioner for Economic Affairs, Joaquín Almunia, has also pointed to this "worrying development" in the Madrid daily newspaper "El País" of Thursday.

Investors currently require a surplus of compensation similar to that which prevailed before the launch of the euro. States whose public finances are the most concerns, such as the Italy and the Greece, are those that the cost of funding was also the most increased. From the Germany, the Italy must provide an additional 1 yield to issue debt in 10 years. This bonus was less than 0.3 on average between 1999 and late 2007. In the case of the France, a premium of more than 0.3 is sought (over the 10 years), against less than 0.1 before the crisis of the "sub-prime".

Of after several speakers, the perception of the credit quality of the various States is not sufficient to justify the increased cost of financing gaps. The evolution of the CDS (credit default swaps") on sovereign debt of the fifteen evidenced. These contracts for protection against the risk of default have all seen their price increase due to the financial turbulence, but the gap is not particularly increased between the Germany and the other countries of the euro area.

Sharp increase in volatility

Liquidity is the main problem. "With the sharp increase in volatility in the markets, liquidity is is rarefied, which promotes the paper on which there are futures contracts", says Patrick Jacq at BNP Paribas. However German debt (the Bund) has the advantage of having such an instrument of coverage.

This means that, when an investor wants to cover its positions on the market of European debt, he buys a contract term on the Bund. This practice has a natural demand for German bonds, hence some tensions of other European countries.

To remedy, one solution would be to open the contract term associated with the Bund to several transmitters with same notation. But this could lead to other distortions. Or to propose compensation of the futures contract in cash and not only with delivery of the bonds. The physical delivery takes the price of the titles to the top.

Finally, the idea to issue common to several countries of European debt securities seems difficult to implement because politically sensitive. "In reality, the solution would be to reduce the volatility because it is in these times of great uncertainty spreads are excessive," notes Patrick Jacq. The strategist also relativizes the situation. "If the crisis increases the differences in cost of financing between countries, it causes a general relaxation of bond yields, i.e. reduces the cost of the debt in absolute."

The performance of the bond market may however be distorted if the emissions increase massively. According to Morgan Stanley, the Fifteen will borrow EUR 765 billion market in 2009, compared to 631 billion this year. Spain, Netherlands and Ireland should see their amounts of emissions take-off from 2008 while progress will be much more moderate for the Italy and the Greece. "States the most indebted and the less well rated, undergoing the pressure in the short term in a climate of systemic risk should better get out then," predicted Morgan Stanley team.