Pattullo warns Spanish bondholders face Irish-style haircuts

Henderson Global Investors' bond fund manager John Pattullo said the current crisis in Spain will result in Spanish bank bondholders taking severe haircuts, after a similar scenario in Ireland last year.

Yesterday, yields on benchmark 10-year Spanish bonds once again moved into dangerous and unsustainable territory above 7%. More worryingly, the country's 2-year bonds saw yields jump by 50bps in a single day, to 5.5%. Yields on the shorter-term debt have more than doubled from the 2.5% mark seen in March. The yield curve in Spain has flattened as a result, with the 10-year bond climbing more slowly from its March level of 5.18% to its current level of 7.19%. Pattullo said the flattening of the curve in the last few months was a sign of stress in credit markets, and he expected juni...