Risk of Peripheral European Bonds Spiking to Unsustainable Levels

EU's announcement on 29 Oct 2010 was the pivotal moment when the bond spreads spiked upwards. The announcement was that they wanted investors to foot a greater share of the bill for future bail-outs, i.e. a haircut being one of the option. The PIGS came under pressure again as worries about them defaulting on their bonds surface again.

Many question the timing of the announcement, including ECB's president. However, everyone knew that Germany was always going to insist at some point that investors have to share some of the burden in the event of future sovereign defaults. European politicians have shaken the confidence in the peripheral economies again.