Specifically, bond traders are again beginning to price in the likelihood of default in one or more of the Eurozone's peripheral nations or so-called PIGS. This is no more clearly demonstrated than in the 10 year Government Bond Yields of those countries (see below for countries in question).
Firstly I use Germany, which is the Benchmark 10-Year Government Bond in Europe - Bond yields above this indicate additional risk for investors.
Ireland - 9.09%
While the 10-Year government bond yields of Greece, Spain, Portugal and Ireland have continued to widen against the benchmark 10 German bond, European equity markets have continued to set new 52 week highs.
FTSE-Eurofirst 300 Index - Click this link to get a breakdown of the constituents that represent this market.
The bond market based on the above appears to be less then convinced by the policy measures implemented so far by Jean-Claude Trichet and the European Central Bank i.e. http://www.efsf.europa.eu/about/index.htm (Click this link for an overview of the most comprehesive solution so far to the European Sovereign Debt Crisis - The European Financial Stability Facility)
The ultimate question here is, who is going to blink first [the bond or equity trader]? - clearly both cannot be right about the health of the overall European economy.