Markets hit by yield hikes on Spanish and Italian national debt

SIGNIFICANT yield increases on Spanish and Italian government debt hit international markets, yesterday, as investor concern over the eurozone debt crisis rose again.

The yield, or interest rate demanded by investors, on Italian five-year bonds went up from 5.32% to 6.29%; while the rate on 10-year Italian bonds (which had risen to a record high of 7.5%, last week, before retreating) was back up from 6.3% to 6.75%.

However, the rise in the yield on Spanish bonds (the 10-year rate passing the 6.10% mark) was a major concern, ahead of a further sale of long-term bonds later this week.

The rising cost of borrowing for two of the bigger economies in the eurozone hit markets hard: 13 of the 18 western European bourses sliding.

The Borsa Italiana, in Milan, was down nearly 2%, while Spain’s IBEX fell 2.15%. London’s FTSE-100 slipped by just under half a percent, but there were falls of about 1.2% in the other two big players, the French CAC and the German DAX.

Ireland’s ISEQ was down only marginally; but moderate gains were noticeable for the likes of Glanbia, FBD, Paddy Power, United Drug, Irish Continental Group and Kingspan, which published a particularly upbeat trading statement. Of the exchange’s traditional heavy hitters there were falls for CRH, DCC and Aryzta; while Kerry Group and Smurfit Kappa enjoyed good gains.

Markets had shown earlier gains on the back of new governments taking over in both Greece and Italy; the countries with the two biggest national debts in the eurozone.

But there was no way those gains would hold out as Italian and Spanish borrowing costs escalated towards the levels that pushed Greece, Portugal and Ireland into having to call for IMF/EU bailouts.

Each of the main US markets were showing dips of between 0.5% and 1%, while earlier rare climbers were evident in Asia, with the Nikkei up by just over 1% and the Hang Seng gaining nearly 2%.