SPIEGEL: What would a fiscal union have to look like so that Germany could accept euro bonds?Schäuble: In an optimal scenario, there would be a European finance minister, who would have a veto against national budgets and would have to approve levels of new borrowing. It would be up the individual countries to decide how to spend the approved funds, that is, how to answer the question: “Should we spend more money on families or on road construction?”Bottom line is that the markets are already restoring some discipline to European sovereign debt (minus Greece). The “safe haven” United States on the other hand is running amok. The specs are loaded to bear on long term Treasuries, one of the more crowded trades ever.Despite all the fanfare, the peripheral sovereign bonds really haven’t been trading that badly of late, indicating that the markets may already baking in ECB debt monetization or reflecting more discipline. Portuguese 10 years are under 10%, not sustainable, but much better than one might think. Italian bonds are keeping in the 6% range, and Spain is back to 6.63% after spiking over 7%. German 10-year bonds on the other hand have seen a jump in yields to 1.578% from a record low of 1.12% on June 1.The rally in the Euro and the Swiss Franc brought out heavy short covering, and rather suggests these are primarily trades at this point, as opposed to big moves.On uranium watch, Japan plans to turn its nuclear power back on this weekend, as Osaka-based Kansai Electric Power (KAEPY.PK) will restart the first reactor to come online since the nation’s nuclear hiatus began in May.The rentry into the CCJ naked puts is 19.78.
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