Spain will sell up to four billion euros of six- and 12-month treasury bills, prior to a full bond auction on Thursday. Italy attracted only anaemic demand at auction last week and Madrid has already had to pay more to borrow since the Federal Reserve shook up the markets with its blueprint for an exit from QE.
However, yields are nothing like back to the danger levels of last year and both countries have frontloaded their funding this year. Economy Minister Luis de Guindos, who declared over the weekend that the Spanish economy will grow in the second half of the year, speaks later in the day.
The political backdrop is also shaky, and getting shakier by the day, although that doesn’t always infect market sentiment. Prime Minister Mariano Rajoy rejected calls to resign on Monday over a party financing scandal and said his reform programme would continue unaffected.
Easier said than done given the former treasurer of his centre-right People’s Party gave new testimony, saying he had made 90,000 euros in cash payments to Rajoy and a senior party official in 2009 and 2010. The betting, for now, is that Rajoy will survive, partly because of the weakness of his opposition. But popular support for his ruling party is leaching away.
It looks like a typical euro zone day. Greek labour unions are striking over public sector cuts and there’s been another downgrade – this time by Fitch of the European Financial Stability Facility, the bloc’s first rescue fund – following France’s loss of its ‘AAA’ status on Friday.