Courtesy of Mish.
Yields on 30-year and 5-year bonds in Spain hit a euro-era record on Friday as the Valencia region of Spain filed for financial assistance.
Bloomberg reports Spain Bonds Slide as Valencia Aid Request Deepens Crisis
Spain’s bonds fell, sending five- and 30-year yields to euro-era records, as the region of Valencia prepared to seek a rescue, deepening concern policy makers are failing to find solutions to the debt crisis.
“Valencia’s request for assistance underlines fears as to the central government’s ability to bring wayward regions to heel,” said Richard McGuire, senior fixed-income strategist at Rabobank International in London. “That puts Spain under a considerable degree of pressure.”
Spanish five-year yields jumped 47 basis points, or 0.47 percentage point, to 6.88 percent at 5:21 p.m. London time, after touching 6.903, the most since the euro started in 1999.
Valencia will tap Spain’s financing facility for regional governments, the area’s administration said in a statement on its website today. The funding mechanism was created last week to inject liquidity into the cash-strapped regions.
‘Death Spiral’The Spanish 30-year bond yield climbed as much as 17 basis points to 7.35 percent, a euro-era record. The 10-year yield rose 26 basis points to 7.27 percent, having jumped 61 basis points this week. The euro-era record is 7.285 percent. The extra yield investors demand to hold Spanish 10-year securities instead of bunds widened to 613 basis points, the most since Bloomberg began compiling the data in 1993.
Spain faces a “death spiral” as higher yields push up borrowing costs, and that adds to concern the nation won’t be able to services its debt, McGuire said.
More Spanish Regions Seek Aid
On Saturday, Bloomberg reported Six Spanish Regions May Seek Bailout After Valencia
The Balearic Islands and Catalonia are among six Spanish regions that may ask for aid from the central government after Valencia sought a bailout, El Pais reported.
Castilla-La-Mancha, Murcia, the Canary Islands and possibly Andalusia are also having difficulty funding themselves and some of these regions are studying plans to tap the recently created emergency-loan fund that Valencia said it would use yesterday, the newspaper said, without citing anyone.
Spain created the 18 billion-euro ($23 billion) bailout mechanism last week to help cash-strapped regions even as its own access to financial markets narrows.
Regional Revenue Plunges
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