Although yields were at a high not seen since November, Spain exceeded its target at a Thursday bond sale, easing fears that financial markets were closed to the country—as its budget minister had said on Tuesday.
As the U.K. called for banking safeguards, Chancellor Angela Merkel of Germany pushed for a two-speed Europe, with core eurozone countries implementing closer financial integration and excluding non-euro and peripheral nations. In Asia, China acted against an increasing economic slowdown by cutting interest rates for the first time since 2008.
Bloomberg reported Thursday that, despite the concerns voiced by Budget Minister Cristobal Montoro on Tuesday that the “door of the markets isn’t open to Spain,” Madrid saw high demand for its bonds. The Spanish treasury had set a target of 2 billion euros ($2.5 billion), and handily achieved it, with demand at 3.29 times the amount sold.
Yield was 6.044% on the 10-year benchmark bond, which was the highest since November 17 when secondary market demands boosted it to a euro-era record 6.78%. However, results were “pretty decent overall and the market appears eminently comfortable with the outcome,” according to John Davies, a fixed-income strategist at WestLB in London quoted in the report. “A tad above the top end of the target volume range obviously looks good, but I think the more encouraging factor was that the 2022 bond came at 6.04%, so safely below levels prevailing in the secondary market.”
George Osborne, the U.K.’s finance minister, said in a Reuters report that Britain would want safeguards to secure its own financial industry should the eurozone take action to establish a banking union.
“There is no way that Britain is going to be part of any eurozone banking union,” he was quoted saying. “I think Britain will require certain safeguards if there is a full-blown banking union.” Since Britain is not part of the joint currency, its economic pronouncements are not always embraced by the eurozone, despite the fact that it depends on the group for much of its economic well-being.
Merkel, however, said prior to a scheduled meeting with Prime Minister David Cameron of Britain that she supports a two-speed European Union, with peripheral countries—and non-eurozone members like Britain—outside the core group of countries that would pursue closer financial integration. In an indirect slam at Cameron, she said such a thing already exists. She pointed to the Schengen agreement, which abolished border controls between some European countries and the monetary union that excludes the U.K. and Denmark, and was quoted in a Bloomberg report saying, “This will be intensified.”