Spanish sovereign paper: war and punishment


How scared are investors of Spain’s debt? Very. So much so that judging by their behaviour, financial analysts in Madrid are increasingly adopting the language of their country’s politicians, if for different reasons.

That is war out there for Spain’s sovereign paper, no one doubts. The Spanish debt has now been under extreme tension during a week and the pressure has pushed credit costs up whether it is for two or ten years. Only Hungary, Turkey, Greece and Portugal suffer from higher yields and tighter access to the international markets.

Government officials sing the mantra that this treatment isn’t fair. Analysts seem to concur: there is scarce new economic events in Spain to justify the punishment, although technical reports from the financial industry in Madrid point at the need of measures that really change the perception foreign investors currently hold of Spain‘s health and stability. Yet, analysts wonder.

For instance, why buyers of Spanish Treasury bills in the primary market are trying to remove them from their portfolios? On July 17, Spain sold €2.6 billion at an interest rate of 3.9 percent, but since them yields have risen to 4.2 percent. Not even Greek T-bills were object of any haircut. And how come Portugal places two-year issuances at lower interest rates than Spain? There hardly is economic evidence for this higher degree of rejection. Then, what about some AAA-rated State’s bond internal rate of return entering negative territory? The UK has again surpassed deficit estimates, and the consumption rate in The Netherlands is contracting at a rapid pace.

We live in sensitive times, if one may say so.



About the Author

Victor Jimenez
London contributor at, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.

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