The state of emergency keeps the country’s airports under military control after a strike about government cuts by air traffic controllers shut down the country in early December.
After a warning yesterday from Moody’s that Spain’s credit rating is on review, yields on 10-year notes shot over 5.55 per cent this morning for the first time since November.
The government auctioned off €2.4bn’s worth of 10 and 15-year debt – less than expected, at an auction described as “disappointing” by analysts. Analysts at BNP Paribas said the auction had “failed to generate any renewed confidence”.
The sale was Spain’s second in a week, with its earlier short-dated bond auction of €2.5bn of debt on Tuesday seeing stronger demand.
But the punitive yields being demanded by bond investors are stoking concerns that the Eurozone’s peripheral sovereigns will be unable to refinance their debt on a sustainable basis.
According to Goldman Sachs, Spain needs to refinance €210bn worth of debt next year.
The growing cost of borrowing for Eurozone states reflects the market’s lack of confidence that Europe’s leaders will be able to put the region’s finances on a sound footing as they meet for a second day of talks today.
Investors are also worried by the fragile state of Spain’s banking sector, which was heavily invested in the property bubble.