Spain's borrowing costs surge
Source: Agencies |
May 18, 2012, Friday
|
Print Edition
Print Edition
SPAIN'S borrowing costs shot up at a bond auction yesterday, after economic data confirmed the country is back in recession and reports of an outflow of deposits from nationalized Bankia hammered its share price.
The Spanish Treasury had to pay around 5 percent to attract buyers of three- and four-year bonds. The longer-dated paper sold with a yield of 5.106 percent, way above the 3.374 percent the last time it was auctioned.
"This ... fits the pattern of recent sales, with the Spanish treasury successfully getting its supply away but at ever-higher yields," said Richard McGuire, rate strategist at Rabobank in London.
"This unfavorable trend looks set to remain firmly in place ... Ultimately, this ratcheting up of yields will likely require some form of outside intervention," McGuire said.
Official data confirmed the Spanish economy shrank by 0.3 percent in the first quarter, putting it back into recession and facing a prolonged downturn as the government cuts spending in an attempt to wrestle down its budget deficit.
Unemployment is already running close to 25 percent, rising to around 50 percent among the young.
The Spanish Treasury had to pay around 5 percent to attract buyers of three- and four-year bonds. The longer-dated paper sold with a yield of 5.106 percent, way above the 3.374 percent the last time it was auctioned.
"This ... fits the pattern of recent sales, with the Spanish treasury successfully getting its supply away but at ever-higher yields," said Richard McGuire, rate strategist at Rabobank in London.
"This unfavorable trend looks set to remain firmly in place ... Ultimately, this ratcheting up of yields will likely require some form of outside intervention," McGuire said.
Official data confirmed the Spanish economy shrank by 0.3 percent in the first quarter, putting it back into recession and facing a prolonged downturn as the government cuts spending in an attempt to wrestle down its budget deficit.
Unemployment is already running close to 25 percent, rising to around 50 percent among the young.
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