MADRID/LONDON, June 7 (Reuters) – Spain showed on Thursday
that it can still access the credit markets at an affordable but
rising cost against a backdrop of feverish behind-the-scenes
planning for a likely European rescue of its debt-stricken
banks.

Madrid sold 2.1 billion euros ($2.6 billion) of government
bonds in a well-bid auction, paying just over 6 percent to sell
10-year debt, up from 5.74 percent last month. That laid to
rest, at least for now, fears raised by Treasury Minister
Cristobal Montoro on Tuesday that Spain was being shut out of
the market.

LONDON, June 1 (Reuters) – The market’s view that 7 percent
is an unsustainable borrowing cost for euro zone economies has
more to do with psychology than mathematics.

After yields in Greece, Portugal and Ireland rose above that
level, the cost of issuing new debt quickly spiked and those
countries were forced to seek international aid.

LONDON, May 30 (Reuters) – Italian government bond yields
broke above the 6 percent danger level on Wednesday as investors
required higher returns to buy debt issued by the euro zone’s
third largest economy at an auction tainted by banking troubles
in neighbouring Spain.

Italy’s funding costs rose sharply at a sale of five- and
10-year bonds on Wednesday, as concerns over Spain’s finances
hurt appetite for riskier euro zone debt only weeks before
Greece faces an election which is expected to determine its
membership of the single currency.

LONDON, May 30 (Reuters) – Italian government bond yields
broke above the 6 percent danger level on Wednesday as traders
made room for fresh supply later in the day against a backdrop
made difficult for riskier bonds by banking troubles in Spain.

Spanish yields also jumped as investors worried about the
country’s plans to raise new funds to recapitalise nationalised
lender Bankia when the country’s borrowing costs are
rising daily.

LONDON, May 29 (Reuters) – Spanish efforts to recapitalise
Bankia, its fourth biggest lender, have eased pressure on the
cost of insuring Spanish bank debt against default – but not for
long because the move is seen as further undermining the
country’s precarious finances.

The fate of Spain and its banking system is increasingly
intertwined as markets worry that any bank rescue will further
drive up national borrowing costs in a vicious cycle.

LONDON (Reuters) – Germany keeps reaffirming its long-standing opposition to shared euro zone bonds but analysts say the region is already headed towards implicit mutual responsibility for national debts and Berlin will come under increasing pressure to succumb.

The region’s complex TARGET2 payments system, which hosts payment flows between euro zone member states, suggests there is already a good deal of risk-sharing implicit in regional structures, not to mention the exposure the European Central Bank has to peripheral debt.

LONDON, May 24 (Reuters) – Austrian government bond yields
hit record lows, while French and Belgian yields plunged on
Thursday as investors sought returns in an expensive market
where even 30-year German bonds are yielding record lows below 2
percent.

Widespread uncertainty over Greece’s future in the euro and
Spain’s struggling banking sector has been fueling flows into
safe haven assets and drove longer-dated German yields to record
lows yet again.

LONDON, May 24 (Reuters) – French government bond yields hit
their lowest level since last October on Thursday as investors
sought value in debt markets other than Germany as well as in
longer-dated Bunds.

Market players have taken refuge in safe-haven debt as the
euro zone’s debt crisis has deepened amid widespread uncertainty
over Greece’s future in the euro and Spain’s struggling banking
system.