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Spain Sells Bonds At Record Levels

Thursday, July 19 14:46:17

Spain's five-year borrowing costs hit new euro-era highs at an auction today while France paid less than 1pc for similar bonds as investors increasingly marginalise southern economies from what they see as the euro zone's safer core. Spain is struggling to convince investors it can control its finances and meet strict deficit guidelines by slashing spending and hiking taxes while also dragging its economy out of a prolonged recession. Spain's conservatives detailed additional austerity measures on Friday. The 6.459 percent yield on Spain's July 2017 bond was almost 40 basis points higher from the previous sale just a month ago, at levels not paid by the Treasury in 16 years, with investors preferring French paper even at rock-bottom returns. "For Spain, it's combination of the economic uncertainty and the bleak economic outlook. France has its problems as well, but they're on a totally different scale than what we're seeing in Spain and Italy," Capital Economics economist Ben May said. The euro zone's largest economy Germany sold bonds at a negative yield for the first time yesterday, and other highly rated euro zone states have also found investors willing to pay to hold their debt as they emphasise capital preservation. (C Reuters)