Spanish bond yields, approaching its highest level in eight years, still do not offer enough rewards to entice fund managers 1,000 miles north of Scotland.
The Spanish bond yields to 10-year note rose 1.52 percentage points to 5.52 percent in the past two months as investors speculated Spain, Greece and Ireland could follow the need of a rescue package to avoid default. That's about half the level available for lending to Greece for the same period.
"You should ask if any of us would buy the Spanish government bond yield of five percent-and-half," said Bill Dinning, head of strategy at Aegon Asset Management, during a discussion between three investor monitoring of 557 billion U.S. dollars ,"It's too risky," said Andrew Milligan, who has the same job at Standard Life Investments.
the Spanish government debt prices fell last week after borrowing costs rose to the sale of government bonds at the end of the year. The 10 - year limit rose more in November than in any month since at least 1993.
The Treasury today in Madrid sells € 3,880,000,000 ($ 5.1 billion) of the three bills and six months, with average yields of the last jump as much as 49 basis points a month ago.
Moody's said Dec. 15 it may cut the rating of Aa1 credit nation, citing "substantial financing requirements, not only for the sovereign, but also for regional governments and banks." The cost of insuring the Spanish government debt climbed to a three-week high yesterday, with contracts of five years to protect $ 10 million debt to $ 12,000 to $ 344,000 per year.
Previous Rescues
The European Union and the International Monetary Fund put together a package of 110 billion euros in loans to Greece in May, paralyzed by fighting government spending to finance. Ireland secured € 85000000000 last month as the bank debt threatened to bring down the economy. Greek 10-year bonds yield 11.9 percent, while in Ireland are at 8.5 percent.
"There are still doubts about the sustainability of the finances of some of the peripheral governments," said Mike Turner, chief strategy officer at Aberdeen Asset Management in Edinburgh. "Unless we get support now more evident, then we believe that markets will return."
EU leaders adopted on 17 December a permanent crisis management in 2013. The leaders had taken "decisive action" to maintain financial stability and promoting economic recovery, said after a two-day summit in Brussels.
"The number of actions required of politicians is increasing every crisis," said Milligan. "The amount of limiting Greece, amount to cover Ireland, Spain cap amount will be very different."
Financing Woes
Spanish 10-year bonds yield about 253 basis points more than German bonds, above the year low of 137 in July. "The spreads are still high in historical terms, emphasizing the need for Spain to strengthen financial market confidence in the sustainability of public finances," said the Organization for Economic Cooperation and Development yesterday. "If the sovereign spreads remain high financing conditions in the private sector could be affected."
The country needs to borrow € 290 000 000 000 next year, including the financing needs of their central government administrations and regional banks, which leaves it "susceptible to new episodes of financial stress," according to Moody's.
"It seems natural to suppose that Spain is a much bigger problem in terms of country size and the impact on the euro as a whole," said Turner. "To allow that extends to the level of Ireland and Greece, which should be seriously, seriously wrong."
Alternative Australia
For now, the Spanish bonds have continued to fall and spread to others to expand, according to strategists. Moreover, there is a better value outside Europe, they said.
Spain had a budget deficit of 11 percent of gross domestic product last year and the government is targeting 9.3 percent this year and 6 percent for 2011. Australia, whose currency rose to a record high against U.S. dollar Nov. 5, is directed to a spending gap of 2.4 percent by 2011 and 10-year bonds yield 5.52 percent.
"Why buy in Spain by 5.5 percent when you can get a better performance in Australia?" Said Hall. "I do not expect the spread of Spanish debt to reach the kind of level that we saw in Greece? No. There is a price at which the Spanish bonds are a buy."
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