Friday 24 November 2017

Spanish debt costs triple in short-term bond auction

Nigel Davies

SPAIN'S short-term borrowing costs nearly tripled at auction yesterday, underlining the country's precarious finances as it struggles against recession and juggles with a debt crisis among its newly downgraded banks.

The yield paid on a 3-month bill was 2.36pc, up from just 0.846pc a month ago. For six-month paper, it leapt to 3.24pc from 1.74pc in May.

Spain has already asked its European Union partners for up to €100bn in aid for its banks, but financial markets have not eased in their pressure, seeing much of the EU's efforts as only temporary solutions. Eurozone finance ministers will hold an emergency teleconference today on the Spanish request.

European leaders meet tomorrow and Friday for their latest attempt to address their 2-1/2 year old debt crisis.

"A failure to see much in the way of traction at this week's EU summit, as seems decidedly possible, will likely put further strong additional pressure on Spanish yields thereby rapidly raising the prospect of additional bailouts," said Richard McGuire, strategist at Rabobank.

Spain's ability to stop the spiralling of its debt pile amid a tough recession to clean up its fragile banking system and to keep its autonomous regions from overspending have kept the country at the centre of a spreading eurozone crisis.

Investor unease at Spain's attempts to do all three means the Treasury has had to rely on domestic banks to sell its debt in recent auctions, strengthening the vicious link existing between sovereign and banking risk. (Reuters)

Irish Independent

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