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Spanish bonds under pressure

Spanish bonds under pressure

With a US Federal holiday and no economic data releases there was little to capture the market’s attention yesterday. Despite a recent bounce, sentiment surrounding the euro remains heavy with Spanish bonds coming under renewed pressure prompted by ongoing concerns over the banking sector.

The yield on Spanish 10-year bonds rose to almost 7% yesterday. The risk premium demanded by investors for Spanish debt rather than German benchmark debt reached over 5%, its highest level since the launch of the euro.  Spanish Prime Minister, Mariano Rajoy, pinned the blame for the rising borrowing costs on concern about the future of the euro. He again ruled out seeking outside aid to revive a banking sector that is still
suffering from a fragile property market.

This morning’s data from Japan was a mixed bag. Unemployment reported a little higher than expected with the jobless rate edging up to 4.6% in April from 4.5% in the previous month. However, Japan’s retail sales and household spending rose in April indicating that
domestic demand in the world’s third-largest economy may be picking up. Retail sales climbed 5.8% from a year earlier, while household spending rose by 2.6%.

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