Bond Markets in Europe

Interesting development in the European bond markets this week.  The yields of Germany and France, typically thought of as the "safer" countries, saw their 10Y yields rise.  Lower grade bonds of Italy, Spain, and Portugal saw their 10Y yields fall.

Bullish interpretation:
The surprise GDP growth of Q2 has led investors to believe that the recession in Europe is over and spreads on the peripheral countries relative to France and Germany should come down.

Bearish interpretation:
The bond market is becoming concerned on a global basis and starting to demand higher risk premium.

My take is that you should be cautious going into the end of the year.  Seeing bonds yields rise in the most liquid markets should lead to a correction in equity markets.  The fact that bond investors are no longer going to be able to sell their bonds to central banks means that pricing should start to normalize and this risk should be reflected in bond yields.