These were the yields and basis point movements of some of the most watched 10 year bonds just before the close in Europe:

Spain: 5.90% (-8bp)
Italy: 5.05% (-5bp)
France: 2.25% (-3bp)
Germany: 1.64% (-3bp)
UK: 1.88% (-4bp)

A successful sale of Spanish short-term debt eased tension in bond markets, but investors are still betting the cash-strapped Mediterranean country will be forced into asking for a bailout.

Spain sold €4.6bn in 12 and 18 month debt at lower interest rates than a similar auction in August, with the one-year notes yielding 2.835% and the 18 month variety going at 3.072%.

The Spanish government has yet to ask its Eurozone peers and the European Central Bank for formal assistance despite multiple banking failures and refinancing difficulties amongst its regional governments.

Deputy Prime Minister, Saenz de Santamaria, indicated in a TV interview that, if the conditions imposed by the ECB were not too onerous, the country may be best served by a rescue.

This would take the form of the ECB buying bonds in the secondary market, with the effect being to increase demand and reduce the interest rate on Spanish bonds.

BS

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