Today's Coming Crisis Movie

Thursday, July 19, 2012

Spain, France auctions show widening gap in euro zone

(Reuters) - Spain's five-year borrowing costs hit new euro-era highs at an auction on Thursday while France paid less than 1 percent for similar bonds as investors increasingly marginalize southern economies from what they see as the euro zone's safer core.

Spain is struggling to convince investors it can control its finances and meet strict deficit guidelines by slashing spending and hiking taxes while also dragging its economy out of a prolonged recession.

Madrid detailed additional austerity measures on Friday but they have done little to soothe investor nerves. German Finance Minister Wolfgang Schaeuble knocked the euro on Thursday when, urging lawmakers to approve Berlin's contribution to a euro zone aid package for Spain's ailing banks, he said the slightest perceived risk of Spanish insolvency could trip up the entire 17-nation bloc.

The 6.459 percent yield on Spain's July 2017 bond was almost 40 basis points higher from the previous sale just a month ago, at levels not paid by the Treasury in 16 years, with investors preferring French paper even at rock-bottom returns. Read More