Spanish bond yields fall as Greece forms new government

Spanish 10-year bond yields have dipped back below 7% today, as investors eye an expected stimulus package from the US Federal Reserve, and with sentiment lifted after Greece managed to form a new government.

The yield on benchmark Spanish debt is down 27 basis points to 6.77% - despite the previous day's auction showing Madrid had to pay 5% to borrow for just a year. The move out of the danger zone above 7% comes as many investors hold their breath ahead of an announcement from Fed chairman Ben Bernanke. Bernanke is expected to reveal an extension of "Operation Twist," the programme launched last year which has aimed - and succeeded - in pushing down longer-term interest rates in an attempt to support the economy via bond-buying. The S&P 500 had closed higher for four straight days and...