Spanish Debt Costs Surge


Concerns about Spain’s ability to keep itself above water played out today in the markets as costs of Spain’s treasury bill sale surged upward, according to The Wall Street Journal.Yields are up almost a full per cent from the last auction on June 14th.

Spanish bonds have come under pressure lately, with markets worrying that Spain, along with Italy, might need rescue packages but are “too big” to bail out.

Spain’s 10 year yields have been trading well above six per cent, and according to JP Morgan, when sovereign 10-year yields reach seven per cent, they start to lose access to the bond market.

Michael Krautzberger, head of the European fixed income team at Blackrock told the Wall Street Journal that the increase in yields in Spain and Italy is “particularly troubling,” and that contagion in these two countries could have extreme consequences for Europe.

The BBC reports that Spain is now paying higher rates to borrow 4.45bn euros ($6.32bn) on the financial markets.

“Spain is hanging on by a whisker at the moment,” 4Cast economist Jo Tomkins told Reuters.

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