There are good things going on in the U.S. (see this month’s ITR Trends Report). There are also good things going on in Europe.
First, industrial production in Germany bounced upward 1.2% in March. The good news was well received by the market. The improvement is wholly consistent with our forecast of mild improvement in Europe in the second half of this year.
Second, the bond market seems to be confident that Europe is on the right track. Ireland is in the marketplace getting 10-year money at 3.43 percent, the lowest since December 2006. Italy is borrowing at 3.88, Spain at 4.19%, and Greece at 9.62% for 10-year bonds. Remember when these rates were over 7 percent and 25 percent? These relatively low rates speak to investor confidence in Europe.
Portugal is also providing us with good news. Portugal sold 10-year bonds for the first time since its 2012 bailout. Yields have fallen to about 5.5%, as opposed to double-digit levels last year. The successful sale, the first since being bailed out two years ago, shows that the austerity program is working and that Portugal is on the right track.
Fiscal austerity and responsibility will eventually restore the EU to good health, and that is a good thing for the U.S. and for the rest of the world.