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May 30, 2012, 01.54 PM IST | Source: Moneycontrol.com

Mecklai graph of the day: Widening Spanish - German Spreads

Mecklai graph of the day: Spanish bonds have declined quite sharply since the past several days and the previous session was no exception either, as spread between the 10-year Spanish yields relative to benchmark German bunds widened the most since the Euro was created.

Mecklai graph of the day: Widening Spanish - German Spreads

Spanish bonds have declined quite sharply since the past several days and the previous session was no exception either, as spread between the 10-year Spanish yields relative to benchmark German bunds widened the most since the Euro was created. The yield spread against 10-year German bunds widened to more than 500 basis points, a record high, as concerns grew that Spain’s lenders will need additional financial support to weather Europe’s debt crisis. Meanwhile, global risk aversion is pushing the German bunds to a record low, which in turn is adding more pressure on the yield spread to widen.

As long as the ongoing banking concerns in Spain persists, Spanish government securities are likely to continue weakening further while demand for the safest assets such as German bunds would pick up. This in turn could lead to further increase in spread between the securities of Euro zone’s largest and 4th largest economy.

The below graph shows the spread of Spanish 10-year bond over German bund for the last 3 months

 

 

 

 

 

 

 

 

 

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