Spain and Italy see borrowing costs surge

The spread between safe haven bond yields and those of peripheral European nations has widened as fears grow over the weakness of the Spanish banking sector.

Italy's borrowing costs surged ahead of a debt auction, rose 24 basis points to 6.155%, near the highest levels since January, while the five-year government bond yield jumped to 5.66%. The government will look to auction off €6.25bn of five- and 10-year bonds later today. Spain's borrowing costs jumped after the European Central Bank rejected its proposals to rescue stricken Bankia. The yield on 10-year Spanish debt rose 0.07 percentage points to 6.55% this morning. In the perceived ‘safe harbours' of Europe, bond yields edged down even further as investors sought shelter from the...