Spanish borrowing rates elevated on contagion fear

AP News
Posted: Jun 17, 2011 9:28 AM
Spanish borrowing rates elevated on contagion fear

The yield on Spanish 10-year bonds hovered round 11-year highs Friday as investors remained concerned that Greece's debt crisis will spread to other countries.

The yield stood at 5.58 percent on the secondary market in afternoon trading, a little down on the 5.70 percent peak struck on Thursday. And the spread, or difference between the yield on 10-year bonds and the benchmark German equivalent, ended Thursday at 274 basis points _ close to a record set late last year.

Rising contagion concerns were also evident in a Spanish bond auction Thursday.

Though it went relatively well in terms of demand, the average rate demanded for the 15-year bonds spiked to a euro-era high of just over 6 percent.

The Spanish government insists the public finances are on the mend and that it won't join Greece, Ireland and Portugal in getting a financial bailout.

The main source of concern remains the banking sector, in particular savings banks, known as cajas.

The Spanish central bank said Friday the banking sector's bad loan rate rose in April to 6.36 percent, the highest since June 1995. The rate had fallen in March for the first time in five months.

The Bank of Spain said the rate among loans made to real estate promoters stood at a record 15.24 percent.

Spain is struggling to recover from nearly two years of recession triggered in large part by the collapse of an overheated real estate sector. The jobless rate stands at 21.3 percent.