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Conditions in Europe are improving

The financial fundamentals in Europe are improving on the margin. 2-yr German government yields are up almost 30 bps from their all-time lows of last month, which was a time when the world thought the euro was going to collapse. Euro swap spreads have dropped almost 20 bps from their highs of late May, in a sign that the market is much less concerned now about a Greek default spreading contagious death and destruction throughout the European banking community. The euro is up 6% from its low one month ago, as the likelihood of a European economic collapse and the dissolution of the euro itself begin to fade. German stocks are now up 1.3% on the year, while the S&P 500 is still down 4.8%.

U.S. swap spreads, meanwhile are back to normal.

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