Wednesday, June 13, 2012
Spain’s Record Yields Show Italy Bailout Risk
Spain’s benchmark borrowing costs rose for a fourth day after touching a record yesterday, raising the specter of sovereign bailouts for the government in Madrid and then Italy that would stretch European Union finances to their limit.
The yield on Spanish 10-year government debt rose 2 basis points to 6.73 percent at 9:55 a.m. in Madrid. Yesterday it touched 6.83 percent, the highest since 1997, after Fitch Ratings predicted that Prime Minister Mariano Rajoy will miss budget-deficit targets he’s made the foundation of his economic policy. Italian 10-year yields posted their highest close in six months yesterday and rose for a sixth session today.
The bond rout wiped out the effects of 1.1 trillion euros ($1.4 trillion) in official funding for euro-region banks that has held yields in check since December. Spain’s 10-year yield is close to the 7 percent level that forced Greece, Ireland and Portugal to seek bailouts. Italy, the second-biggest sovereign borrower in the euro area, may need to seek a rescue within months, said James Nixon, chief European economist at Societe Generale SA (GLE) in London.
“The crisis will inevitably roll on to the next domino, and that’s Italy,” Nixon said in a telephone interview. “The southern European economies are effectively in free-fall and market appetite for southern European debt is rapidly drying up. I can’t see anything to turn that dynamic around.”
Full article: http://5acbd501.tinylinks.co
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http://www.bloomberg.com/news/2012-06-12/spain-s-record-yields-show-italy-bailout-risk-as-crisis-spreads.html