Spanish and Italian borrowing costs hit fresh peaks on Tuesday for the euro-era as the European debt crisis shot back to the centre of investors’ attention.
Benchmark 10-year bond yields reached 6.46 per cent for Spain and 6.26 per cent for Italy, heading closer to the 7 per cent level that propelled Greece, Ireland and Portugal to seek bail-outs as investors consider it unsustainable.
The premiums Madrid and Rome pay to borrow over Germany hit yet more highs as well and in lunchtime trade were at 400 basis points and 381bp respectively, nearing levels that could trigger margin calls at Europe’s biggest clearing house
The moves are unnerving bankers working with peripheral European countries. “These spreads are not sustainable. You clearly need to see some reprieve,” said one senior European banker.