Cyprus bank savings raid raises fresh eurozone contagion fears
Investors dump bonds raising borrowing costs of Italy, Spain, Greece and Portugal
Monday 18 March 2013
The one-off tax raid on savers in Cyprus raised fresh contagion fears today as spooked investors dumped debt in the eurozone’s strugglers and the euro took a battering.
The implications for other nations in the single-currency bloc triggered a bond market sell-off which pushed up the borrowing costs of Italy, Spain, Greece and Portugal in a turbulent session.
Spain’s benchmark cost of borrowing for 10 years pushed beyond 5% while Portugal’s rose above 6%. Italy – where markets had calmed after last month’s inconclusive election – saw yields jump 11 basis points to 4.67%. Investors instead turned to safe-havens such as US, UK and Germany, which all saw falling debt costs.
CooperCity analyst Louise Cooper said: “The damage is done. Europeans now know that their savings could be used to bail out banks.”
The pound rose more than a cent to €1.1721 against the euro before falling back as investors absorbed the news of the unprecedented €5.8 billion (£5 billion) hit to depositors in return for a €10 billion rescue loan. The single currency also crashed to 14-month lows below $1.30 against the dollar.
The cost of insuring against sovereign defaults also soared. Investors looking to protect themselves against Italy going bust had to pay $295,000 to insure $10 million of debt for five years, according to financial data provider Markit — up $22,000.
The eurozone’s biggest banks saw their shares tumble amid fears that the savings swipe could prompt investors to pull their cash out.
Royal Bank of Scotland analyst Alberto Gallo warned: “Despite Cyprus being a special case in terms of the size of its banking system relative to GDP, we could see a general deterioration in deposit flows for smaller institutions in the periphery.
“In the worst case scenario, deposit flight could re-emerge in Spain and Greece.”
- 1 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 2 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 3 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 4 AirAsia flight QZ8501 missing: Plane carrying 162 passengers from Indonesia to Singapore disappears over Java Sea
- 5 Naomi Wolf reacts to Isis 'conspiracy theories' critism after she questions whether beheading videos are real
President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
UK weather: Warning for more snow and ice as freezing temperatures and gales hit Britain
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Millions of Britons struggling to feed themselves and facing malnourishment
Immigrants make UK racist, says Ukip councillor Trevor Shonk
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...