Germany

European leaders have abandoned plans for bondholders to bear the brunt of sovereign debt collapses, following talks overnight to tackle the eurozone crisis.

The S&P 500 has risen 1.7%, with European equity markets also holding onto gains after German Chancellor Angela Merkel and French President Nicolas Sarkozy reached accord on the debt crisis.

AN OPEN LETTER TO MERKEL

Angela Merkel and Nicholas Sarkozy are set to meet today as political commentators warn Europe is entering the end game for the crisis, which must be resolved this week to save the euro.

German Chancellor Angela Merkel helped lift markets further today after revealing moves towards "fiscal union" in Europe were afoot.

The yield on 1-year German bunds turned negative today for the first time ever, according to Bloomberg data, as the European Central Bank looks set to ramp up measures to fight the debt crisis.

Leading fund managers believe gilts now look like the next safe haven bond market to come under threat ahead of DMO sale this week.

Yields on short-dated German government bonds turned negative this week as bondholders paid to lend to the country, despite a dismal auction of 10-year bonds on Wednesday.

The yield on German bunds has risen above UK gilts for the first time since 2009 after Japan shifted out of bunds overnight following Germany's disastrous debt auction.

So suddenly no-one wants to lend to Germany for the next ten years - hardly surprising because by lending to Germany investors are effectively lending money to Greece, Portugal and even Italy.