"Spain, once again, is where the confidence game is played"
- Sebastian Paris Horvitz, strategist at HSBC Private Bank Suisse
Spain sold the maximum targeted amount of debt, 2.5 billion euros, during yesterday's auction with spiking borrowing costs. The interest rate of three-year bonds rose to 4.373% from April's figure of 2.89% while interest rate of five-year bonds surged to 5.106% from 3.374 in March. Meanwhile, yields of 10-year sovereign debt approached 6.334%, the level close to 7% that forced Ireland, Greece and Portugal to apply for bailouts.
"The auctions have gone OK, probably better than the market feared," said Peter Chatwell from Credit Agricole.
"The auction points to the fact we're running out of road of debt sustainability for Spain. Ultimately, some form of outside intervention will be necessary," claimed Richard McGuire, a senior fixed-income strategist at Rabobank International in London.
"Spain is potentially the biggest euro-zone accident waiting to happen," said Neil Williams, chief economist at Hermes Fund Management.
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