Today contagion worries spread in Euro zone as bond cost for Spain increased. The European markets slid as Spanish Bonds rose to just below the psycological 7% level as it was forced to pay for €3.5 bn worth of bonds. According to the Daily Mail

That was more than more than at any time since 1997, five years before the euro, and not far off those which proved unsustainable for the likes of Portugal, Ireland and Greece.

Fears for the euro’s survival were fuelled still more as French borrowing costs jumped another 50 basis points and the spread with German bond yields rose to 206 basis points for the first time since the launch of the euro.

…….

‘It is another nervous day and certainly not helped by the auctions. The fact that contagion has spread to the core does suggest that markets are more concerned about a break-up,’ said Philip Shaw, chief economist at Investec.       

 What investors are asking is what is the end-game? How can one of the authorities solve the crisis, who is going to do it and so far we have no answers.’    
 
 

With further worries across Europe, the Irish Independent reports

In a separate auction, France’s cost of borrowing over two and four years jumped by about 0.5pc – French banks have a significant exposure to Greek debt.

 Italy’s cost of borrowing is already at unsustainable levels piling more pressure on newly appointed Prime Minister, economist Mario Monti as the country needs to refinance €200bn in bonds by the end of April.

 However, many analysts believe no amount of austerity will calm the bond markets at this stage with intervention by the European Central Bank seen by some as the only resolution.

 They see the bank as the lender of last resort for troubled eurozone economies but the German Government is resisting any suggestions that its top bank would bale out Governments in the region.

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