Spain’s risk premium hits euro-era recordJuly 20th, 2012 - 12:20 pm ICT by IANS
Madrid, July 20 (IANS/EFE) Pressure on Spain’s debt markets briefly sent the yield on the country’s benchmark 10-year bond above 7 percent Thursday and caused the Iberian nation’s risk premium to close at a euro-era record of 579 basis points.
Analysts said the day’s disappointing debt auction - in which investors demanded interest rates above 6 percent for Spain’s five- and seven-year notes, even higher than the rates in the Treasury’s most recent auction of 10-year bonds - drove down bond prices on the secondary market.
In the wake of the auction, which generated less demand than previous debt sales, Spain’s risk premium - the extra return investors demand on the country’s 10-year bond relative to equivalent safe-haven German debt - climbed as high as 583 basis points before falling slightly at the close.
The yield on Spain’s 10-year bond closed Thursday at around 6.9 percent, a level that many economists say is unsustainable over the long haul.
The Spanish economy has been battered by the global recession and the collapse of a massive real-estate bubble, which has left many banks saddled with toxic property assets.
Overall unemployment stands at more than 24 percent, while Spain’s young people are facing a jobless rate of 50 percent.
In recession for the second time in three years, the country has suffered a sharp drop in tax revenues stemming from numerous business failures and high joblessness.
In a bid to improve the country’s financial picture, Spain’s government has pushed through an austerity package - approved Thursday by parliament - aimed at achieving 65 billion euros ($80 billion) in savings to meet a European Union-mandated budget deficit target.
The austerity package, the fourth since Prime Minister Mariano Rajoy took office late last year, includes an increase in the sales tax and cuts to the wages of public-sector workers and retirement benefits.
Spain’s ailing banks are due to receive a 100-billion-euro ($123-billion) European Union bailout over 18 months, but the rescue has not allayed concerns about the country’s ability to solve its economic woes.
- Spanish debt auction attracts strong demand - Jan 13, 2012
- Spain auction sees lower borrowing costs for benchmark bond - Sep 21, 2012
- Spain sells 3.2 bn euros in bonds at higher rates - Apr 18, 2012
- Spain to trim another $80 bn with new austerity measures - Jul 12, 2012
- Spain's borrowing costs rise sharply in bond auction - May 18, 2012
- Spain sells bonds at sharply lower yields - Jan 18, 2012
- Spain pays sharply lower yield on 10-year bonds - Jan 20, 2012
- Spain raises 2.59 bn euros in bond sale - Apr 05, 2012
- Spanish royals cut their own pay - Jul 18, 2012
- Yield on Spanish bonds climbs up - Jul 10, 2012
- Spain sells $3.2 bn in bonds - Dec 17, 2010
- 15 arrested in anti-austerity protests in Spain - Jul 21, 2012
- Pay cut spurs more protests by Spanish public employees - Jul 17, 2012
- Markets continue to hammer Spanish debt - Jul 24, 2012
- Spanish government approves austerity package - Jul 14, 2012
Tags: 10 year bonds, austerity, basis points, bond prices, budget deficit, business failures, debt markets, debt sales, deficit target, global recession, iberian nation, jobless rate, joblessness, mariano rajoy, property assets, public sector workers, real estate bubble, retirement benefits, risk premium, spanish economy