Bonds: Spain on the brink

Date: Wednesday 16 May 2012

These were the yields and movements on some of the most watched 10 year bonds by the close in Europe:

Spain: 6.29% (-6bp)
Italy: 5.83% (-4bp)
France: 2.90% (-1bp)
Germany: 1.47% (flat)
UK: 1.88% (-2bp)
US: 1.76% (-1bp)

News that Greece had appointed an interim government and set a date for new elections saw the under-pressure debt of Italy and Spain rise during Wednesday.

The head of the Greek Council of State, Panagiotis Pikrammenos, will lead the temporary administration, while a second round of elections will be held on June 17th following an inconclusive poll on May 6th.

These developments are cold comfort for the markets. The difference (or spread) between the interest rate on 10 year German bonds and equivalent Spanish securities reached a record 505 basis points (5.05%) during Wednesday.

The movement happened on the same day as the Spanish Prime Minister, Mariano Rajoy warned his country could be forced out of the debt markets.

BS

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