Spanish and Greek 10-year spreads to German Bunds have widened from their mid-March lows, prompting talk about contagion from Grexit. In historical context, though, that’s a blip on the radar. Maybe we should call it Contagionella in Italy and Contagionita in Spain.

The most important data point is that EUR/USD is stronger, rather than weaker, as the final act of the Greek tragicomedy is played out. EUR was trading in a volatile range around 1.0725, up two big figures from its April 13 low, as overall yield levels rose in the Eurozone. The Euro has traded in line with aggregate yield levels available in European sovereigns. Italy has about as much foreign debt as Germany (both about EUR 1 trillion), so Italian yields have had a stronger gravitational effect on the Euro than German yields. Like real estate (location, location, location) there are three things to know about the Euro exchange rate: yield, yield, and yield.

When the Euro trades up with the increased possibility of Grexit, that’s not exactly contagion. Nothing to see here, folks.

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