With the Europe's market madness continuing, everyone is focused on Italy and Spain. But the "flight to quality" doesn't stop there. Here is a quick look at the Austrian 5-year bond spread to Bunds (Bloomberg).
Austrian financial institutions have relatively little exposure to "fringe" Western Europe. Instead the bond market seems to be uneasy about the Eastern Europe exposure.
WSJ: Today, it’s the euro zone that has started a wave of risk aversion that is only now engulfing the weaker Eastern European states. The first to suffer has been Hungary, where the forint plumbed a new record low against the euro Tuesday on concerns about a possible downgrade from one or more of the leading rating agencies, and despite better-than-expected annual growth of 1.4% in the third quarter.This in turn started a round of rumors (which seem to be rampant these days) about a downgrade of Austrian sovereign bonds and the spread spiked.