Debt Crisis: Is Germany No Longer Safe?

A week ago German bonds hit an all-time low as investors flocked to one of the last remaining safe havens in the euro zone. Today, Germany doesn’t seem quite so safe.

In the latest sign of European debt crisis contagion, Moody’s has lowered its investment-grade ratings on six German banks. Commerzbank AG (CBK.DE), UniCredit Bank, DekaBank Deutsche, DZ Bank AG Deutsche, Landesbank Baden-Wuerttemberg and Norddeutsche Landesbank GZ were all downgraded. Commerzbank and UniCredit were both given negative outlooks.

Moody’s reasoning for the downgrades that that he banks are too exposed to asset classes that are no longer safe due to the ever-worsening state of Europe’s sovereign debt crisis.  The vulnerabilities include the global shipping sector, international commercial real-estate markets and various holdings.

While the German banks’ ratings haven’t plummeted as far as banks in, say, Greece, Spain and Italy, the fact that mighty Germany has now been touched by Europe’s massive debt shows that no euro-zone countries are safe.

This comes a week after yields on 10-year German bonds hit an all-time low of 1.26%. That coincided with Spain’s 10-year yields soaring to a six-month high of 6.6% as the debt-ridden country had to bail out cash-strapped lender Bankia SA.

German bonds have since risen a few ticks to 1.3%. That percentage may continue to rise now that Germany doesn’t seem quite as safe as it did a week ago.

Published by Wyatt Investment Research at