Spanish government bonds fell for an eighth day

Spanish government bonds fell for an eighth day after Moody's Investors Service said it may cut the country's credit rating, citing a possible fight for the government to fund itself next year amid losses at banks.

The decline pushed the yield 10-year Spanish to within nine points of the highest since September 2000. Portuguese bonds fell after costs rose by 500 million euros (664 million dollars) the sale of Treasury bonds. Spain plans to sell bonds tomorrow.

"The rating action reminds the market and investors that the fundamental problems have not been mitigated by the purchase of the European Central Bank bonds," said Michael Leister, a bond analyst at WestLB AG in Dusseldorf. "Until the supply is off tomorrow, it is expected that Spain will continue to underperform."

The Spanish production of 10-year note rose two basis points to 5.58 percent after 11 hours in London. The guarantee of 4.85 percent, due October 2020 fell 0.16, or 1.6 euros per 1,000 euros (1,329 dollars) nominal value of 94.56. The German bund yield was little changed after rising to 3.07 percent, the most since May 4.

Spain's debt could increase because of "the cost of recapitalizing the banking sector, while limited control over regional finances erode the central government's ability to improve their finances," Moody's said in a statement.

"Moody's also wants to emphasize that Spain continues to be regarded as a claim much stronger than other countries with problems of the euro area," said analyst Kathrin Muehlbronner in the report. "Review of Moody's therefore most likely conclude that Spain's rating will remain in the range ca."

Portuguese Sale

Moody's does not see a Spanish rescue plan as "probable" but "can not be ruled out," said Muehlbronner.

Portuguese 10-year yields rose 11 basis points to 6.66 percent. Borrowing costs increased 3.4 percent in the bill of sale today, from 1.82 percent last time the securities were sold on 3 November. The values attracted bids worth 1.9 times the offer, compared to 2.2 in November.

Spain lost the top AAA rating from Moody's in September as leaders of the euro-region struggled to contain the debt crisis. Spain is raise taxes, cut wages and privatization of industries to persuade investors that they can avoid a bailout. Ireland last month became the second euros for ransom after Greece requested assistance in April.

Spanish bonds fell yesterday after the country was forced to pay more in a sale of accounts 12 months and 18 months. Spain is due to issue 3 billion euros of 4.85 percent for 2020 and 4.65 percent of the 2025 debt tomorrow. It is the only European country except Italy region plans to sell bonds for the rest of this year.

Yields of Ireland, Portugal

Belgian bonds also fell yesterday after Standard & Poor's said that "the prolonged political uncertainty" could hurt your credit score. Belgium 10-year bonds were little changed today, with the yield up one basis point to 4.07 percent.

Greek 10-year yields rose seven basis points to 12 percent. Greek unions grounded all flights to and from Athens, kept the ferries docked at ports and public services closed today in protest against wage cuts that the government adheres to the terms of an international bailout.

Ireland 10-year yields rose two basis points to 8.45 percent.

EU leaders begin a two-day summit at 5 pm tomorrow in Brussels to focus on the permanent system to combat the crisis that occurred in 2013.

Germany is opposed to expanding the government-funded assistance beyond the emergency fund of EUR 750 billion set in May, while ECB President Jean-Claude Trichet, said more money must be made available to end the debt crisis instead of relying on the central bank's program of gift vouchers.

"Maximum flexibility '

"We're calling for maximum flexibility and capacity, quantitatively and qualitatively," Trichet told reporters in Frankfurt, in remarks released yesterday.

German bonds returned 5.5 percent this year, compared with 5.1 percent for U.S. Treasuries and 5.2 percent for UK gilts, according to indexes compiled by us and the European Federation of Financial Analysts Societies.

Spanish bonds lost 5.3 percent, while the debt of Ireland gave investors a loss of 11 percent and 7.2 percent Portuguese bonds, indexes show.