Amid increasing worries about the eurozone’s debt problems, countries are finding it difficult to borrow money by selling government bonds – for different reasons.
In its latest auction, on Wednesday, Germany was unable to sell all the bonds it wanted.
Germany is considered to be the safest of safe havens and so it is offering extremely low rates of interest, which didn’t attract investors.
It got bids for less than the maximum target of 10-year bonds it had on offer.
By contrast, Spain, which investors fear could default, is having to offer unsustainably high interest, though those yields did ease a little bit on Wednesday.
Frankfurt based analyst Oliver Roth explained the fears: “Spain’s been a constant source of worry for some months now, although there was a bit of a temporary respite as the interest levels it had to offer fell as the focus was more on Greece. Nevertheless, Spain has a lot of problems. It’s just the sheer size of the Spanish debt that makes traders and investors shudder.”
Worries about Spain’s budget troubles and the slow progress of its desperately-needed economic reforms have investors wary of lending to Madrid.
And the thought of Spain not being able to pay its debts is prompting contagion fears for Italy which just saw its short term borrowing costs rise.