Spain's debt hits record as euro zone crisis worsens

Thu Jun 14, 2012 7:59am EDT
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By Richard Hubbard

LONDON (Reuters) - Spain's 10-year bond yield climbed to a euro-era record of 7 percent on Wednesday as the storm surrounding Europe's debt crisis worsened, with fears over its impact on global growth sending world shares lower.

U.S. stock index futures pointed to a more mixed start on Wall Street after weak retail sales data and the euro zone's problems had sent shares lower on Wednesday. .N

"The underlying problem of deteriorating confidence in sovereign debt in Europe is continuing to intensify," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi.

The rise in Spanish debt yields came as Germany, Europe's most powerful economy, rebuffed calls from other European leaders to help underwrite the region's debt or guarantee deposits in euro zone banks.

Chancellor Angela Merkel, addressing parliament in Berlin, labeled ideas such as issuing joint euro bonds or creating a Europe-wide bank deposit guarantee scheme as "miracle solutions", and said they were "counterproductive" and would violate the German constitution.

The apparent tensions at heart of the euro area over how to deal with the crisis did little to shake the single currency out of its trading range however, with many investors sidelined by the approach of Sunday's cliffhanger election in Greece, which could see it leave the 17-member currency bloc.

The euro has spent the week within a range between a near two-year low set on June 1 of $1.2288 and Monday's three-week high of $1.2672 and was up 0.1 percent on Thursday at $1.2575.

"The euro has been relatively stable as we head into the Greek election, and that will dictate market direction next week. Investors do not want to take on extra risk at this point," Hardman said.   Continued...

A Tokyo Stock Exchange employee looks at a monitor as he works at the bourse in Tokyo June 4, 2012. REUTERS/Yuriko Nakao