Spain borrowing costs hit euro-era record high

[dipsydoodle]

Source: BBC News

Spain's borrowing costs have risen to the highest rate since the launch of the euro in 1999.

The benchmark 10-year bond yield hit 6.81%, as optimism about the weekend's Spanish bank bailout continued to evaporate.

Italy's 10-year bond yield rose to 6.28%, a rate not seen since January, as concerns about its finances rose.

The interest rates are seen as unsustainable in the long run for two countries weighed down by huge debts

Read more: http://www.bbc.co.uk/news/business-18405729

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It is not thought the dust will settle, if ever, prior to the result of next weekends elections in Greece which may decide whether or not Greece stays in the Euro..

[dkf]

1. Austerity may be counterproductive but that is what the bond market wants.

[unblock]

2. austerity is productive for bondholders. not many others, though.

[bossy22]

3. Austerity is not productive for bondholders

and they know it. If bondholders wanted austerity you would see a positive correlation with bond yields and austerity measures (or atleast announcements). In fact quite the opposite occurs many times. The market knows that austerity in a depressed economy only depresses the economy even more and further inhibits the country's long term ability to service its debts

The only ones calling for Austerity are the German Politicians.

[unblock]

4. the german politicians are serving the interest of...?

[bossy22]

7. well...very simplistically...themselves

I know there is a DU need to find the equivalent of the "banksters" in all things financial but this doesnt necessarily fit the bill. German imposed austerity is more about a belief system within the German governmen t. They are stuck on the idea that "all debt is bad" and that this euro crisis is due to out of control spending- the only solution to this in their eyes is to "punish" these countries for their "irresponsible" ways. It's really just that simple (and niave). I think Paul Krugman put it best in his blog post http://krugman.blogs.nytimes.com/2012/06/09/wolkenkuckucksheim/ .

If you are looking for a Wall Street vs Main Street story you better keep looking. This just isn't it

[unblock]

9. you really think no one's making money of a policy of austerity?

given that i've worked on wall street and continue to work in the financial sector, i'm hardly looking to blame "banksters".
in part because i know "wall street" is hardly the monolith people assume it to be, in part because i know most wall streeters, at least the employees, are actually liberals (this is manhattan we're talking about, after all) and in part because yes, that would be naive and simplistic.

that said, isn't it similarly naive and simplistic to presume that any politician is actually acting solely out of philosophy and that no one has a vested interest that at least happens to align with that "philosophy"?

if german bondholders and banks and equity holders and business owners and consumers and so on all would benefit from bailouts and stimulus for greece and spain and italy, then there would be a big and successful campaign to convince german voters of its merit notwithstanding any "debt is bad" principles.

"stuck on stupid" only works when someone profits from it.

[bossy22]

11. working on wall street you know already even in downturns someone is going to make a profit

But i truly believe this is a case of "stuck on stupid". There are mounds of evidence that shows that the conclusions being drawn by Germany are completely incorrect yet they still move foward. It doesnt take an economic genious to realize that when you keep depressing an economy the debt to GDP ratio gets worse. Austerity is making the situation worse and therefore puts a greater chance of default on these bonds. The international bond market just wants to get paid and they seem to not be receptive of all this austerity.

I do think that the Germany thinks they will "profit" off this because they are living in their fantasy land. When you say that what caused this debt crisis in Spain was irresponsible government deficit spending when in fact spain was actually running a surplus you have to be living in some lala land.

[dkf]

6. The Germans want austerity and the bond market wants the Germans on the hook for everything.

[bossy22]

8. Exactly!

The crisis won't end until their is a eurobond or the currency breaks up

[cthulu2016]

10. yields are inverse to price

Bond investors most assuredly like austerity ***in a nation that has a super-low default risk*** because the best scenario for a (safe) bond holder is deflation, and the worst is inflation.

Bond holders ***want*** the economy to be depressed.

[bossy22]

12. technically yes

but as you depress the economy, servicing of the debt becomes more difficult.

[Prometheus Bound]

5. I think they want solvency and they'll take it any way they can get it.