Spanish yields pass 7% after junk warning

Spanish government bond yields have shot through the danger level of 7% as fears grow its debt could soon be rated as junk.

Following a warning from ratings agency Moody’s that Spain could be downgraded in the next three months, the bid yield on Spanish bonds spiked above 7% for the first time since the creation of the euro.

The yield on 10-year bonds rose to 7.006%, according to data from Tradeweb.

Moody’s said Spain’s decision earlier this week to borrow €100bn (£80bn) from other eurozone countries to bail out its banks will “further increase the country’s debt burden, which has risen dramatically since the onset of the financial crisis”.

Spanish benchmark 10-year bond yields have continued to rise despite the €100bn bailout announced over the weekend, culminating in today’s move above 7%.

Moody’s said the Spanish government had “very limited” access to financial markets.

“The Spanish economy’s continued weakness makes the government’s weakening financial strength and its increased vulnerability to a sudden stop in funding a much more serious concern than would be the case if there was a reasonable expectation of vigorous economic growth within the next few years,” Moody’s said.

 

This article was first published on Investment Week

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