Tuesday, November 30, 2010

European Debt Fears Grow, Investors Sell Off Bonds From Spain, Portugal Italy

Investors sold off government bonds from Spain, Portugal and Italy on Tuesday amid worries that Europe's debt crisis has not been contained by Ireland's bailout but will force more expensive rescue efforts.

The yields on Spain's 10-year bonds jumped as high as 5.7 percent, a euro-era record difference of 3.05 percentage points against the benchmark German 10-year bond. That compared with 2.67 points on Monday and below 2.00 points just a week ago.

The spread on Italy's 10-year bond, meanwhile, reached 210 points, also the highest since the launch of the euro, before easing back somewhat. Portugal, whose yields soared last week, likewise saw its spread edge higher.

"Ireland's bailout package has clearly failed to stop the rot in the eurozone markets and if anything it has focused attention on other countries in the periphery," said Mitul Kotecha, analyst at Credit Agricole CIB.

The continued market turmoil "will come as a bitter blow to European officials who had hoped that it would help to turn sentiment around," he said.

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