Spain’s borrowing costs rise as €2.54 billion bonds are sold
By Sara Sjolin, MarketWatch
LONDON (MarketWatch)—Spanish stocks sank below the 7,000 mark and weighed on European markets Thursday, while rumors—later denied—that Fitch Ratings may cut France’s sovereign rating combined with disappointing U.S. jobless-claims data also spurred selling.
Weak numbers from the Philadelphia Federal Reserve further weighed on investors’ moods.
The Stoxx Europe 600 index XX:SXXP -0.05% was off 0.2% at 257.27, in a choppy session in which the benchmark swung between gains and losses.
Most markets opened in positive territory, but gains were dented in mid-morning trade as borrowing costs rose in Spain’s keenly watched bond auctions.
The government sold 2.54 billion euros ($3.3 billion) in 2- and 10-year paper, but saw borrowing costs rise for both maturities. Borrowing costs rise for Spain at key auctions
In the secondary market, yields on 10-year government bonds ES:10YR_ESP +1.35% were up 6 basis points at 5.91%.
Spain’s IBEX 35 index XX:INDI +0.89% tumbled 2.1% to 6,933.00, following a 4% drop on Wednesday after a report showed the ratio of bad loans among Spanish banks was higher. The last time the Spanish index closed below 7,000 was on March 9, 2009.
Among banks, shares of BBVA SA ES:BBVA -3.53% BBVA -2.79% shed 3.7% and Banco Santander SA ES:SAN -3.33% gave up 3.5%.
“This is going to go on until someone in the EU comes out in Spain’s support. However, I fear that the political will is not there with the French presidential election looming. Afterwards, it may be too late though,” said Predrag Dukic, senior equity sales trader at CM Capital Markets in Madrid
Spanish stocks, along with most other European indexes, were sent sharply lower in midday trade on rumors that Fitch would downgrade France’s sovereign credit rating. The rumors were later denied, Dukic said, but highlighted that the market uncertainty spilled over into Spain.
“The fact that the French rumor is now only a rumor and the subsequent jitters in Spain just show you how markets feel about us: Sell at any opportunity,” he said in emailed comments.
Earlier in the day, the French government sold €7.97 billion in government bonds, near its top end of its planned range of €8 billion, news reports said.
Markets continued their downturn in afternoon trade after disappointing manufacturing activity in Philadelphia for April. The bank’s business condition index fell to 8.5 from 12.5 in March, slipping below analysts’ expectations of a drop to 10.8.
