The bond market was jittery and volatile this month after the announcement of the Greek referendum, sparking a widespread rise in sovereign and corporate yields.

It all started with the announcement on 1 November 2011 of the organisation of a Greek referendum on the approval of the European bailout plan and the associated austerity measures. Notwithstanding the final outcome of the initiative, it was mainly the impact of the contagion to other countries (Italy and Spain to begin with, followed by France to a lesser extent) that marked the period. Associated with the traditional inability of European leaders to provide coherent solutions, these events touched off four series of consequences. 1) Yield margins in Italy and Spain once again tightened considerably, with 10-year nominals reaching 7% and 6.20%, respectively. 2) French margins then followed, posting nearly 200 bp and 10-year nominals around 3.45% and a high of 3.80%. 3) Corporate bond margins eased substantially versus their respective sovereign benchmarks, with some names going even lower, such as Air Liquide, EDR, ENEL, Endesa, etc. 4) Bund yields ended up paying the price for their very low levels and the general climate of uncertainty, topping the 2% threshold at around 2.30%. The general climate did not stop a certain level of activity on the primary market, however, with Cap Gemini issuing a five-year bond with an actuarial return of 5.32%, i.e. Bund +424 bp.