Spanish Woes Push German Bonds to All-Time Low

In the ever-evolving drama that is the European debt crisis, Spain is the new Greece and German bonds are the safest place to hide from all the carnage.

Yields on the 10-year German bonds hit an all-time low of 1.26% today as Spanish and Italian investors fled to safer havens. Spain’s 10-year yields soared to a six-month high of 6.6% on news that the debt-ridden country will have to borrow more money to bail out cash-strapped lender Bankia SA. Italian bond yields edged above 6% as an auction of its 5- and 10-year bonds drew little interest.

At more than 6%, both Spanish and Italian bond yields are reaching unsustainable levels. Knowing that, investors are flocking to the sustainability and safety of the low-yielding German bonds. The yield on two-year German bonds fell to a paltry 0.004%.

Like German bonds, investors also fled to U.S. Treasury bonds. The 10-year Treasury note dipped to a record low yield of 1.63% today. The 10-year notes have been below 2% since mid-April.

Meanwhile, U.S. stocks are down more than 1% today on the debt crisis concerns in Spain and Italy.  The benchmark S&P 500 has taken the biggest hit, falling 1.3% to erase all of Tuesday’s big gains.