Wow that was fast.
MADRID (AP) — Euphoria over a lifeline of up to €100 billion ($125 billion) to rescue Spain’s hurting banks morphed into a financial markets rout in a matter of hours Monday, as investors digested the still-undefined plan and became concerned the country may be unable to repay the new loans.Nils Pratley at the Guardian is impressed. “Bailouts in the eurozone used to generate relief rallies that lasted at least a week. The Spanish version couldn’t even manage a full morning.”
The yield on 10-year Spanish government debt, which had fallen to 6% soon after the start of trading, ended the day at 6.5% – an astonishing turnaround. Worse, Italian bonds followed the same pattern, closing a whisker above 6%, the highest since January. Far from calming nerves, the grant of €100bn (£81bn) or so of cheap loans for Spanish banks seems only to have hardened investors’ analysis that the eurozone debt crisis is getting worse.
The Spanish weakness only seemed to underline the weakness of other countries in the Eurozone as the bulls-eye moved directly to Italy. “Investors also zeroed in on Italy, sending its bond yields sharply higher amid worries it could be next in line for a bailout because of a deepening recession and increasing pressure on the administration of Premier Mario Monti.”
And Spain’s economy is in terrible shape with no sign of improvement anytime soon.
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