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| Version 1 | Version 2 |
|---|---|
| Spain's borrowing costs hit 14-year high | Spain's borrowing costs hit 14-year high |
| (40 minutes later) | |
| Spain's borrowing costs have risen at its latest bond auction, as Spaniards prepare to vote for a new government to tackle its financial crisis. | Spain's borrowing costs have risen at its latest bond auction, as Spaniards prepare to vote for a new government to tackle its financial crisis. |
| The average yield on 10-year government bonds soared from 5.433% in October to 6.975% - the highest since 1997. | The average yield on 10-year government bonds soared from 5.433% in October to 6.975% - the highest since 1997. |
| A high yield indicates investors may not have confidence in the government to fully repay its debts. | A high yield indicates investors may not have confidence in the government to fully repay its debts. |
| The figure is perilously close to 7% - the level at which other eurozone countries have had to seek bailouts. | The figure is perilously close to 7% - the level at which other eurozone countries have had to seek bailouts. |
| Italian 10-year bond yields passed 7% earlier this month. | Italian 10-year bond yields passed 7% earlier this month. |
| Opinion polls indicate that the opposition Popular Party will win Spain's general election on Sunday, ending seven years of Socialist government. | Opinion polls indicate that the opposition Popular Party will win Spain's general election on Sunday, ending seven years of Socialist government. |
| 'Dreadful' | 'Dreadful' |
| The Spanish government sold 3.56bn euros (£3.04bn; $4.79bn) worth of bonds out of a maximum target of 4bn euros. | The Spanish government sold 3.56bn euros (£3.04bn; $4.79bn) worth of bonds out of a maximum target of 4bn euros. |
| The auction attracted bids worth 1.5 times the securities offered. The so-called bid-to-cover ratio was down from 1.8 in October. | The auction attracted bids worth 1.5 times the securities offered. The so-called bid-to-cover ratio was down from 1.8 in October. |
| "The result was dreadful. They didn't manage to raise the full amount and the bid-to-cover is really poor," said Achilleas Georgolopoulos, rates strategist at Lloyds in London. | "The result was dreadful. They didn't manage to raise the full amount and the bid-to-cover is really poor," said Achilleas Georgolopoulos, rates strategist at Lloyds in London. |
| "The fiscal profiles of Spain and Italy are different but their yields seem to be aligning now." | "The fiscal profiles of Spain and Italy are different but their yields seem to be aligning now." |
| A similar auction in France saw French short-term borrowing costs - for its two and four-year bonds - also rise by about half a percentage point. | A similar auction in France saw French short-term borrowing costs - for its two and four-year bonds - also rise by about half a percentage point. |
| The spread between French and German 10-year yields widened to as much as 203 basis points - the widest since the euro was created in 1999, amid fears that France will be the next eurozone country to face a debt crisis. | |
| ECB role | |
| France, whose AAA credit rating has come under threat, has called for the European Central Bank (ECB) to take stronger action. | |
| Many analysts believe the ECB should buy up large quantities of bonds to try to stem contagion in the eurozone. | |
| But Germany has resisted this move, opposing any suggestions for the ECB to become the "lender of last resort", fearing it may lead to rising inflation. | |
| German Chancellor Angela Merkel reinforced that stance on Thursday. "If politicians think the ECB can solve the euro crisis, then they are mistaken," she said. | |
| Marc Ostwald, analyst at Monument Securities, said the eurozone had to deliver something which was going to calm the markets. | |
| "At the moment, markets feel like they are being given no comfort whatsoever," he said. | |
| In Italy, new Prime Minister Mario Monti will outline austerity measures later aimed at restoring confidence in the country's economy. | |
| He will present his plans to the Italian senate ahead of a confidence vote in the upper house. |