Spain's bond yield jumps above 6%

 

Spain's cost of borrowing on the international debt markets rose sharply again today, increasing worries it may become the latest member of the eurozone to seek a financial bailout.

The yield - the interest rate Spain would have to pay to raise money on the debt markets - on 10-year government bonds jumped to 6.10% on the secondary market. It had closed at 5.93% on Friday after a week of persistent market tension.

The yield is the highest since the country's new conservative government under Prime Minister Mariano Rajoy took office in December.

The 10-year bond yield surged toward 7% late last year, a rate considered unsustainable for a country over a long period. Greece, Portugal and Ireland had to ask for bailouts after their yields stayed above 7%.

Although the administration has implemented a barrage of labour and financial reforms, investors remain worried about Spain on several fronts:

- the country's banks are weighed down by a mountain of bad loans from the collapse of the property market in 2008.

- many of the Spain's 17 semi-autonomous regional governments have overspent wildly.

- Spain is expected to enter its second recession in three years this quarter, with the country's central bank forecasting its economy will contract 1.7% this year. The unemployment rate is 23%, rising up to almost 50% for those aged under 30.

The jump in Spain's yield comes at the beginning of a week in which the country's Treasury holds two rounds of bond auctions - 12- and 18-month bills on Tuesday, and benchmark 10-year bonds on Thursday.

The government insists it will have no trouble financing itself this year and that auctions held so far this year have gone well. But that changed almost two weeks ago, when a medium-term debt auction hit the bottom end of what the Treasury targeted, triggering the latest increase in yields and placing Spain firmly back into the centre of the eurozone debt crisis.

The situation was not helped by government-released data Friday showing the country's troubled banks borrowed a record from the European Central Bank in March, demonstrating the difficulty they have securing financing elsewhere.

Monday's bond market jitters extended to Italy, viewed as another weak link in the 17-nation eurozone. Its 10-year bond yield rose to 5.60% from about 5.50% on Friday.

After the bailing out Greece, Portugal and Ireland, the eurozone has agreed to increase the size of its financial firewall to help out its members should they fail to raise money from the markets.

ut Spain's economy is twice the size of the previous three bailout victims put together and analysts say the firewall is not large enough to deal with the potential threats coming from Spain and Italy.

Start your day with The Independent, sign up for daily news emails
Sport
tennisLive: Follow all the updates from Melbourne as Murray faces Czech Tomas Berdych in the semi-final
Arts and Entertainment
'The Archers' has an audience of about five million
radioA growing number of listeners are voicing their discontent; so loudly that even the BBC's director-general seems worried
Arts and Entertainment
Henry VIII played by Damien Lewis
tvReview: Scheming queens-in-waiting, tangled lines of succession and men of lowly birth rising to power – sound familiar?
Arts and Entertainment
Taylor Swift is applying to trademark song lyrics from 1989
musicYou'll have to ask Taylor Swift first
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
Joel Grey, now 82, won several awards for his role in Cabaret
people
Sport
Harry Kane celebrates scoring the opening goal for Spurs
footballLive: All the latest transfer news as deadline day looms
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: SQL DBA (SSIS, ETL) - London, £60k

£60000 per annum: Ashdown Group: SQL DBA (SSIS, ETL) - Central London, £60,000...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Recruitment Genius: Service Agent / QA Engineer

Negotiable: Recruitment Genius: This is an exciting opportunity to join an est...

Recruitment Genius: C# / XAML Developer

Negotiable: Recruitment Genius: This is an exciting opportunity for a talented...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness