Markets trust Spain as debt costs stay low
SPAIN’S promises of economic and budget reforms have dragged down the country’s borrowing costs from dangerous highs in late 2011 to much more manageable rates, with even Greece’s woes not taking bond yields back to unsustainable levels.
French borrowing costs also fell, though weak car registration data provided a reminder that Europe’s economies remain in poor shape.
The Spanish parliament approved banking reforms yesterday, requiring banks to set aside extra provisions by the end of the year to cover potential further losses on property.
The measure is part of a wider programme of budget cuts and economic reforms to restore stability and market confidence in the country, pushed by Prime Minister Mariano Rajoy.
He was elected in November, when the country’s borrowing costs on 10-year debt hit a dangerous 6.7 per cent.
Rajoy took office in December and borrowing costs have fallen to 5.4 per cent or below. Spain borrowed €4.07bn (£3.38bn) yesterday, with the average yield on three-year debt coming in at 3.33 per cent – up on rates earlier this month, following worries over Greece, but well below last year’s levels.
Meanwhile France sold €8.46bn in bonds with two, three and five-year maturities with no difficulty – the two-year yield fell from 1.05 per cent seen a month ago to 0.89 per cent.
Data out yesterday showed EU car sales dropped by 10 per cent in the year to January.