Yields on Spanish 10-year bonds break above 6% in the run up to two auctions this week

04/16/2012 4:08 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

The bond market was nervous today in the run-up to Spain’s bond auctions tomorrow and Thursday. Tomorrow, April 17, Spain will attempt to auction 2 billion to 3 billion euros in 12- and 18-month bills. On Thursday, the government will attempt to auction 1.5 billion to 2.5 billion in longer maturity debt maturing between 2014 and 2022.

Today, the benchmark Spanish 10-year bond climbed 0.18 percentage points to 6.16% before a late rally sent the yield back down to 6.07% at the close. That still left the yield above the psychologically important 6% level. The Spanish 10-yead bond hadn’t seen 6.16% since December 1, before the European Central Bank unleashed its program of 1 trillion in 3-year loans for European banks.

The movement of yields on Spanish bonds is just the center ring in a very crowded European circus.

The rise in yields prompted another call from the Spanish government for the European Central Bank to resume its buying of Spanish bonds in the secondary market. The central bank announced that it did not buy bonds today.

The International Monetary Fund begins its two-day spring meeting today. The financial markets want to know two things: first, will the rest of the world put up more cash so the IMF has enough money to intervene in a meaningful way in the Spanish debt crisis? and, second, will the group raise or lower its forecast for 2012 global economic growth from the current 3.3%?

And finally, The Guardian is reporting out of Madrid that the Spanish government will move to take over the finances of one of the country’s autonomous regions as early as May. The regions have been almost shut out of the financial markets recently. More control by Madrid could well strike the financial markets as a good thing because the regions have not been able/willing to take promised steps to reduce their budget deficits to agreed targets.

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