Borrowing rates climb for Spain
Bank bailout plan faces skepticism
MADRID — Spain’s benchmark borrowing rate hit its highest level Tuesday since the country adopted the euro currency, after ratings agency Fitch downgraded 18 banks on Tuesday and investors continued to find more questions than answers in the country’s decision to seek help for its ailing bank sector by tapping a 100 billion euro ($125 billion) eurozone bailout fund.
The yield on Spain’s 10-year bond rose to 6.81% in afternoon trading, according to data provider FactSet, while stocks seesawed between positive and negative territory and ended the day almost unchanged.
The bond rate, seen as a measure of a nation’s financial health, fell back to 6.67% when markets closed. That’s the same level as Spain’s previous record — set on May 30 as the country’s economic woes multiplied, and last November after the thenruling Socialist Party was ousted by the conservative Popular Party now struggling to keep the nation afloat financially. This brings Spain’s borrowing costs dangerously near 7% — close to the level at which Greece, Ireland and Portugal sought international bailouts.
Spain agreed last weekend to take a European bailout for its banks, but investors are worried that will not solve the country’s problems, as the government may have trouble paying the money back.
Fitch said in a statement that its downgrade of the banks was a result of a previous downgrade of the Spanish sovereign debt on June 7. Fitch said it had conducted stress tests, both on the Spanish banking sector as a whole and on individual banks.
The rescue package for Spain’s crippled lenders was announced Saturday by finance ministers from the 17-country euro area, but the exact amount the country’s banks will receive has not yet been published.