Europe Fears a Credit Squeeze as Investors Sell Bond Holdings

[collegeinusa]

<p>Interesting …</p>

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The flight from European sovereign debt and banks has spanned the globe. European institutions like the Royal Bank of Scotland and pension funds in the Netherlands have been heavy sellers in recent days. And earlier this month, Kokusai Asset Management in Japan unloaded nearly $1 billion in Italian debt.</p>

<p>At the same time, American institutions are pulling back on loans to even the sturdiest banks in Europe. When a $300 million certificate of deposit held by Vanguard’s $114 billion Prime Money Market Fund from Rabobank in the Netherlands came due on Nov. 9, Vanguard decided to let the loan expire and move the money out of Europe. Rabobank enjoys a AAA-credit rating and is considered one of the strongest banks in the world.</p>

<p>“There’s a real sensitivity to being in Europe,” said David Glocke, head of money market funds at Vanguard. “When the noise gets loud it’s better to watch from the sidelines rather than stay in the game. Even highly rated banks, such as Rabobank, I’m letting mature.”</p>

<p>The latest evidence that governments, too, are facing a buyers’ strike came Thursday, when a disappointing response to Spain’s latest 10-year bond offering allowed rates to climb to nearly 7 percent, a new record. A French bond auction also received a lukewarm response.

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<p><a href=“http://www.nytimes.com/2011/11/19/business/global/lenders-flee-debt-of-european-nations-and-banks.html?ref=business&pagewanted=all[/url]”>http://www.nytimes.com/2011/11/19/business/global/lenders-flee-debt-of-european-nations-and-banks.html?ref=business&pagewanted=all&lt;/a&gt;&lt;/p&gt;