Spanish bailout speculation mounts
Spain's 10-year bonds advanced for a fourth day, the longest streak of gains in three weeks, amid speculation the nation is preparing to seek a sovereign bailout that will trigger European Central Bank purchases of its debt.
Two-year Spanish yields fell to the lowest level in a week after Economy Minister Luis de Guindos said Spain is studying the ECB's bond-buying proposal, having met with European Economic and Monetary Affairs Commissioner Olli Rehn yesterday.
"The market thinks that Spain asking for aid is just a matter of time," said Anders Moeller Lumholtz, an analyst at Danske Bank in Copenhagen.
"This would be positive for the bonds and we see it happening within the next couple of weeks."
Spain's two-year note yields fell 12 basis points, or 0.12 percentage point, to 3.19 per cent at 9.42am London time, the lowest since September 25.
The 4.75 per cent security maturing in July 2014 rose 0.22, or €2.20 per €1,000 face amount, to 102.70.
The nation's 10-year yield declined 13 basis points, to 5.75 per cent.
Spanish prime minister Mariano Rajoy, who spent six months campaigning for ECB president Mario Draghi to buy bonds, has been weighing the benefits of seeking aid since August 2.
Spain has asked the EU for a rescue loan of up to €100 billion for its struggling financial sector, although it only expects to use about €40 billion of that amount.
Mr Rehn yesterday said that Brussels was “ready and prepared to act” should Spain want the bailout, reinforcing the feeling that Madrid will make the request for help in the coming weeks.
A stress test found Spain’s banks needed €59.3 billion in extra capital in an adverse scenario. Popular, Spain’s sixth-largest bank in assets, had a €3.2 billion shortfall.
Additional reporting: Bloomberg