It was revealed on Monday that Spanish 10-year government bond
yields rose above 6%, fuelled by fears over the health of the
country and the risk of Eurozone contagion.
While there are calls being made for the European Central Bank
to help Spain through the resumption of the bon-buying program,
any such move may be put on hold due to the yield on Spain's
10-year sovereign debt rising to 6.14%. Last week, it ended ay
In addition, the cost of insuring the debt went up. Spanish
credit defaults rose to 511.5 basis points, a record. Thanks to
that, it will cost 511,500 euros to insure 10 million euros of
Spanish government debt annually over a five-year period.
Despite the fact that tough austerity measures have been
introduced in Spain, investors and analysts continue to look at
the country nervously. Even a recent cash injection by the ECB
hasn't managed to calm those fears.
It is not only Spain that is suffering though. Negative
sentiment continues to affect Italian and Portuguese government
bonds too. Monday saw Italian 10-year government bonds trading up
9bp at 5.62%, while Portuguese bonds were up 6bp at 12.62%. Over
in Ireland, benchmark yields are the closest they have been to
Spain's since August 2010.
When the ECB made its three-year loan offer to Eurozone banks,
Spanish and Italian were two of the strongest participants. That
offer saw over 1 trillion euros put into Europe in two long-term
refinancing operations in both December 2011 and February
Much of the money from that was used by Spanish and Italian
banks to purchase government bonds in 1Q. However, any benefits
of the operations seem to be worn out.
Some analysts are now saying that Spain is now in full crisis
mode, and that it is looking increasingly likely that the country
will be looking for a bailout sooner rather than later.
Meanwhile, Spain's borrowing costs have led to muted world
markets, with fears of a potential bailout obviously on a lot of
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