Spain clears market test, investors wary
Spain showed on Thursday that it can still access the credit markets at an affordable but rising cost against a backdrop of feverish behind-the-scenes planning for a likely European rescue of its debt-stricken banks.business Updated: Jun 07, 2012 22:16 IST
Spain showed on Thursday that it can still access the credit markets at an affordable but rising cost against a backdrop of feverish behind-the-scenes planning for a likely European rescue of its debt-stricken banks.
Madrid sold €2.1 billion ($2.6 billion) of government bonds in a well-bid auction, paying just over 6% to sell 10-year debt, up from 5.7% last month. That laid to rest, at least for now, fears raised by treasury minister Cristobal Montoro on Tuesday that Spain was being shut out of the market.
Despite a rally in stocks, bonds and the euro due partly to expectations of action by central banks to revive flagging economic growth, the euro zone remains under pressure from investors and global partners to act decisively soon to resolve its festering debt crisis.
"There is a better environment over the last few days for Spanish bonds. Talk of a rescue for Spanish banks is the thing that is reducing risk aversion in the markets," said Alessandro Giansanti, bond strategist with ING bank in Amsterdam.
France, the euro zone's number two economy after Germany, continued to benefit from its safe-haven status, selling €7.8 billion of bonds at record low yields.
Merkel douses hope
US President Barack Obama and Canadian and Japanese leaders telephoned Europe's main leaders this week to express concern at the worsening crisis and press for stronger action.
German chancellor Angela Merkel doused expectations that a June 28-29 European Union summit would produce a major breakthrough to a closer fiscal and banking union in the 17-nation currency bloc, saying progress would take longer.
"I don't believe that there will be one single summit that will decide on a big bang," Merkel told ARD.
"But what we have been doing for some time, and on which a working plan will certainly be presented in June, is to say we need more Europe."
First Published: Jun 07, 2012 22:12 IST