The yields on ten year Spanish government bonds are on the rise and are currently at 5.53%. This came after a few good days of lowers yields, that were pushed by the Chinese pledge to buy Spanish bonds and to support the country.
But now, as the fears grow in Europe, the yields are moving up. Spain is the Euro-zone’s fourth largest economy, and is “too big to bail” – the European bailout fund doesn’t have the capacity to support Spain. So, this makes the Spanish yields a good barometer for the European debt crisis.
Spain has a big load of debt to pay back in the first half of 2011. This includes the central government, autonomous communities, municipalities and banks. The real estate boom and bust created heavy mortgage issues, even for big banks such as Santander.
EUR/USD is on the edge of collapsing to a four month low, on this tense day. 1.2970, the level reached at the end of November, is the critical level to watch.