Spanish Yields Surges as Greek Vote Fails To Damp Concern!

• Spanish Yields Surges as Greek Vote Fails to Damp Concern! 
  By Lucy Meakin and Emma Charlton, http://www.bloomberg.com/ 
  Spanish bonds slid, propelling 10-year yields to more than 7 percent, after yesterday’s Greek election failed to convince investors that politicians will be able to tame Europe’s financial woes.
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  Italian debt also fell and German bunds rose, reversing earlier declines. Spain’s yields climbed to euro-era records as a report today showed the nation’s bad loans increased in April. The securities tumbled last week after the bloc’s fourth-largest economy requested as much as 100 billion euros ($126 billion) of aid on June 9 to support its banks. Greek bonds rose after pro-bailout parties won enough seats to control parliament.
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  “The spotlight is now back on Spain,” said Christian Reicherter, a Frankfurt-based analyst at DZ Bank AG. “The market is worried about the bad loans at the Spanish lenders, which is pressuring the bonds. This goes to show that theEuropean debt crisis isn’t solved and we expect bunds to remain well supported.”
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  Spain’s 10-year yield climbed as much as 41 basis points to 7.29 percent, the most since the euro was introduced in 1999. It was 28 basis points higher at 7.16 percent at 4:44 p.m. London time. The 5.85 percent security due January 2022 sank 1.835, or 18.35 euros per 1,000-euro face amount, to 91.085. Five-year note yields climbed 42 basis points to 6.55 percent and rates on 30-year bonds jumped 22 basis points to 7.22 percent, also euro-era records.
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  Bad Loans
  The yield on Germany’s 10-year bund, Europe’s benchmark government debt security, slid three basis points to 1.41 percent after jumping as much as 11 basis points to 1.55 percent. The nation’s one-year yield dropped below zero for the first time since May 30 and the euro fell 0.5 percent to $1.2571.
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  Spain became the fourth euro member to seek a bailout since the debt crisis began almost three years ago when it asked for aid to rescue its lenders earlier this month. The 7 percent threshold on 10-year bonds helped trigger sovereign bailouts for Greece, Ireland and Portugal.
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  Bad loans as a proportion of total lending at Spain’s financial institutions jumped to 8.72 percent in April from 8.37 percent in March, the Bank of Spain said on its website.
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  “Seven percent for Spain is not unsustainable, it is uncomfortable,” Holger Schmieding, chief economist at Berenberg Bank, said in an interview on Bloomberg Television’s “The Pulse” with Maryam Nemazee. “The risk is always that it doesn’t stop at 7 percent — that it goes to 8 and 9 percent and then we would have a full-blown panic.”
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