The move in Spanish yields yesterday was a shot across the bows for Risk. While the prospect of contagion within the eurozone has risen with 10y Italian yields gapping higher out of range, yields outside Spain have not yet reached levels where the rise becomes self sustaining. Commodity currencies also have yet to reverse their recent uptrend; however, the prospect of such a reversal is high and if NZD/USD were to fall below 0.7840 on a closing basis it would imply investors are streaming to the exits.
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Barclays Capital