Bonds: Spain faces ratings downgrade and possible bailout

Date: Friday 08 Jun 2012

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

Spain: 6.22% (+13bp)
Italy: 5.77% (+6bp)
France: 2.52% (-5bp)
Germany: 1.33% (+14bp)
UK: 1.64% (-7bp)
US: 1.60% (-4bp)

Spanish bonds fell, pushing the yield up for the first time in nearly a week as Fitch downgraded the country’s credit rating.

Fitch bumped Spain’s rating down to BBB, just two notches above “junk” status over concerns the nation’s recession would continue through 2013.

Several sources are reporting that Prime Minister Mariano Rajoy could request formal Eurozone assistance during a conference call at the weekend.

Spain is desperate to recapitalise its stricken banks but also faces having to prop up some of its heavily indebted regional governments.

Further darkening the mood was news that Italian industrial production fell 1.9% between April and March while an index of sentiment amongst French executives fell from 94 in April to 93 in May.

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