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11/17/2011 7:30 PM ET

EFE News Service / BAS / EFE Ingles

ECB intervention eases pressure on Spanish bonds

Released : Thursday, November 17, 2011 7:30 PM

Madrid, Nov 17 (EFE).- Intervention by the European Central Bank eased market pressure on Spanish debt, which ended 460 basis points above benchmark German bonds Thursday after approaching the 500 bps level.

Market jitters also forced the Spanish Treasury to pay an average yield of almost 7 percent – the highest in 14 years – to sell some 3.5 billion euros in 10-year bonds.

After the debt auction was completed, Spain’s risk premium – the extra return investors demand compared to safe-haven German government bonds – skyrocketed to as high as 499 bps.

The ECB responded by buying up Spanish debt, easing the pressure and lowering the risk premium to 460 bps, the same level as Wednesday.

The turmoil in Spain’s sovereign debt market came just three days before general elections in which the conservative main opposition Popular Party is expected to win in a landslide.

The PP’s candidate for prime minister, Mariano Rajoy, said he is confident a victory for his party will restore investor confidence in the country.

But the incumbent premier, Socialist Jose Luis Rodriguez Zapatero, said Thursday that Spain’s financial woes will not be solved with a new government and urged the European Union and the ECB to come up with an “immediate” solution.

Europe needs a central bank that “really is one and defends the common currency and the countries of the common currency,” he said, echoing calls by some economists for the ECB to intervene more forcefully to tackle the euro-zone debt crisis.

The country’s economy minister, Elena Salgado, also referred to Thursday’s turbulence in Spain’s bond market, saying the Iberian nation does not need a bailout and that the sustainability of its debt is “beyond all doubt.” EFE


(c) 2011 EFE News Services (U.S.) Inc.


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