Bond relief for Spain and Italy as mood jumps

SPANISH yields dipped below the crucial seven per cent level yesterday as the debt-stricken country insisted that it had no need for a full-blown bailout.

Spain’s 10-year government bond yield, a gauge of the compensation investors demand to lend to the government, fell 27 basis points to 6.93 per cent. The dip came ahead of today’s bond sale which seeks to raise up to €2bn in an auction of two-three- and five-year bonds.

Spain again insisted yesterday that its €100bn banking bailout was not the forerunner of a broader sovereign bailout. “Spain has not been rescued because it does not need to be rescued. Spain has the support of its European partners and European institutions,” budget minister Cristobal Montoro said.

Meanwhile, the equivalent Italian yield fell 15 basis points to 5.77 per cent, despite negative data showing a drop in industrial orders in April compared to the level a month earlier. According to seasonally-adjusted figures, orders were down 1.9 per cent in April compared to March, due to a four per cent slump in foreign orders, while the domestic market dipped by 0.3 per cent, the National Institute of Statistics (ISTAT) said.

The figures came as Italian Prime Minister Silvio Berlusconi suggested a return to the lira could not be ruled out. “Leaving the euro is not a blasphemy,” he wrote on his Facebook page. “What would happen if Italy, Spain or Greece went back to their old currencies? I don’t know, maybe there would be a loss of wealth but I don’t understand why,” he was quoted as saying.