Spanish and Italian bond yields climb again on contagion fears

Spanish and Italian bond yields have continued to race ahead following the European Union's bailout of the troubled economy's banking system.

Investors are concerned that the €100bn bailout package, announced over the weekend, will put increasing pressure on the Spanish government's ability to repay its debts. They fear contagion will spread across the rest of the eurozone, with holders of Spanish debt punished. Yesterday yields reversed early falls to climb back towards the danger level of 7%, and today they climbed even higher. By mid-afternoon, yields on Spain's benchmark 10-year bond hit 6.65%, nearing May's six-month highs, while Italian 10-year notes rose to 6.19%, a high not seen since January. Meanwhile equity ma...