Spain suffers debt auction struggle
26 May 2010 @ 00:50
Spain struggled to issue debt on Tuesday amid rising tensions in the new issue markets after the seizure of one of the country’s savings banks at the weekend.
Investors worry that an expected auction on Wednesday of Portuguese bonds could also suffer as fears over the financial crisis in Europe spreads.
Nick Chamie, senior strategist at RBC Capital Markets, said: “The markets are gripped by fear at the moment, and it is difficult to see things improving for a while. It is quite possible the fear in the markets will get a lot worse.”
In a sign of the deepening crisis, traders said Spanish banks were now, like Greek and Portuguese banks, completely shut out of the international interbank lending markets, cutting off an important source of funding. Dealers said Spanish banks could only borrow in their domestic markets.
Concerns centred on Spain this week after the Bank of Spain seized control of one of the country’s cajas, or savings banks.
This prompted worries that other savings banks could run into trouble because of their exposure to the country’s ailing property sector.
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