LONDON (Reuters) – Cyprus may be a “special case” in the eyes of European officials, but their handling of its bailout is taking a toll on another small euro zone member with an over-burdened banking sector – Slovenia.

Yields on its two-year bonds surged to nearly 7 percent on Thursday, overtaking those on longer-dated paper and inverting the yield curve – a sign investors are pricing in a high risk of default.

LONDON (Reuters) – The euro zone’s awkward handling of Cyprus’s bailout puts extra pressure on the bloc’s downgrade-threatened sovereign ratings and shows policymakers overestimate their ability to contain the crisis, credit agency Moody’s said.

Cyprus clinched a 10 billion euro bailout from international lenders this week, but its terms have broken with past taboos by seizing up to 40 percent of the cash held in the island’s banks by wealthy individuals and firms.

LONDON (Reuters) – The euro zone’s awkward handling of Cyprus’s bailout has put extra pressure on the bloc’s downgrade-threatened sovereign ratings and shows policymakers are overestimating their ability to contain the crisis, Moody’s has warned.

Cyprus clinched a 10 billion euro bailout from international lenders this week, but its terms have broken with past taboos by seizing up to 40 percent of the cash held in the island’s banks by wealthy individuals and firms.

LONDON, March 19 (Reuters) – Investors sought safety in
low-risk German Bunds on Tuesday before a vote in the Cypriot
parliament which was expected to reject a law needed to secure
the island a vital bailout and avoid a default.

Cyprus’s government came up with a proposal to spare small
savers from a tax on bank deposits in a last-minute attempt to
win parliamentary backing for the rescue, but said lawmakers
still seemed likely to reject the levy.

LONDON, March 19 (Reuters) – Money market stress gauges
started to rise on Tuesday as the impact of plans to partially
fund a bailout for Cyprus by taxing savers raised the risk of a
more widespread crisis in the euro zone system.

Although the tension was rising, the full-blown panic seen
at previous crisis flashpoints remains some way off thanks to
steps taken by the European Central Bank to shore up the
region’s banks and foster confidence in sovereign bond markets.

LONDON, March 19 (Reuters) – Uncertainty that Cyprus can
avoid a default underpinned safe-haven Bunds on Tuesday, with
lawmakers due to vote later on a controversial law that would
secure the country a bailout but penalize ordinary savers.

A government official said parliament is likely to reject a
levy on bank deposits, even as Cypriot and euro zone officials
sought to soften an initial proposal that many investors say
sets a dangerous precedent for the euro zone.

LONDON, March 14 (Reuters) – Spanish bonds’ outperformance
of Italian debt may be running out of road as some investors
look beyond political deadlock in Italy and conclude that Spain
remains the euro zone’s bigger long-term problem.

The premium investors demand to hold 10-year Spanish debt
rather than Italy’s has shrunk more
than 50 basis points to just 16 as uncertainty in the wake of an
inconclusive Italian election last month prompted investors to
dump local debt, sometimes in favour of Spanish bonds.

LONDON, March 12 (Reuters) – German Bunds rallied on Tuesday
after breaking key technical resistance as a sharp fall in UK
manufacturing underpinned safe-haven debt markets.

Bunds followed UK gilts after data showed the biggest
contraction in factory output since last June, bolstering
speculation that the Bank of England would increase the target
for its bond purchase scheme to support the economy.