Why Spanish bond yield spike may not spell disaster for Europe

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Investors have suggested the eurozone crisis has not yet reached another critical stage, despite a €100bn bailout of Spanish banks failing to prevent the country's borrowing costs reaching record highs.

With markets underwhelmed by the bailout package and Moody’s downgrading Spain’s credit rating to one notch above junk, Spanish 10-year government bond yields hit a euro-era record of 7% last Thursday. Having fallen back at the end of last week, 10-year yields rose to a fresh high of 7.1% this morning as investors soured on the results of the latest Greek election. The spread over German debt rose to another euro-era high of over 550 basis points. But Stuart Frost, co-manager of the Enhanced ARC and Cautious Absolute Rate & Currency funds at RWC Partners, said investors should note go...

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