Spanish borrowing costs set to rise further

19 June 2012

Borrowing costs are set to rise further for Spain at bond auctions this week as uncertainty continues to cloud the eurozone, analysts believe.

Yesterday (18 June), the future of the economic bloc appeared to be a little brighter as it emerged that the pro-bailout New Democracy party attracted more than 29 per cent of the vote and had therefore been victorious in the Greek general election.

Prior to the poll, there had been widespread concern that an anti-bailout alternative such as Syriza would win, meaning Greece would look to exit the eurozone - a step that would have caused turmoil in the markets.

However, despite the fact this did not happen, policymakers in Madrid are still expected to have to pay more to lend in auctions today and on Thursday as speculation mounts that Spain may need a sovereign bailout.

Harvinder Sian, rate strategist at the Royal Bank of Scotland, told Reuters: "It looks as though the market's broken now. I don't think there's anything the Spanish can do to bring it back."

By Gary Cooper

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