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Spanish Bond Yields Hit 6-week High

Spanish Bond Yields Hit 6-week High

Spain's bond yields rose to their highest level in six weeks on Monday amid increasing investor concern over the recent political uncertainty.

The Spanish 10-year benchmark yield climbed above 5.30 percent today to its highest level since mid-December. Spanish Prime Minister Mariano Rajoy is facing calls to resign over a corruption scandal. The premier has denied any involvement.

The corruption allegations surfaced just ahead of his trip to Berlin to hold talks with the German Chancellor Angela Merkel. The meeting comes just before the two-day European Council summit that starts on February 7. The European Central Bank will also hold its latest rate-setting session on Thursday.

The rising popularity of former Italian premier Silvio Berlusconi ahead of elections this month is also causing concerns among investors. The Italian 10-year yield climbed nine basis points to 4.42 percent today.

Analysts fear such uncertainty on the political front could undermine investor confidence and stall the rally in Spanish and Italian bonds seen this year. Commerzbank AG strategists have recommended reducing peripheral debt holdings.

Meanwhile, an indicator of Eurozone investor confidence rose for a sixth month in a row in February, results of survey by the think tank Sentix showed on Monday. The index rose to -3.9 from -7 in January, but slightly below the expected level of -3.3. The assessment of current situation among 984 survey participants improved in February.

by RTT Staff Writer

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