Here's my summary of the key news overnight in 90 seconds at 9 am, including news the yield on Spain's 10 year government bond yield hit 6.47%, which effectively means the Spanish cannot borrow anymore at a sustainable interest rate.
The spread between the Spanish 10 year bond yield and the German 10 year bund rose to a euro record high 514 basis points in another indication of extreme stress in European bond markets that is causing a wholesale run in funds from Southern European bonds into German bonds on fear of a euro zone breakup. See more here at Bloomberg.
The spike in Spanish bond yields came after news Spain plans to inject 19 billion euros of bonds into the balance sheet of Spain's third largest bank, Bankia, so Bankia can then use the bonds as collateral to borrow cash from the European Central Bank. This was seen as an attempt to avoid having to raise non-existant cash in Spain and arrange a back-door bailout via the European Central Bank. See more here at Bloomberg.
Concerns are also growing that other Spanish banks will need bailouts. FTAlphaville reported from a Nomura research note showing Spanish banking giants BBVA and Santander, along with other struggling regional banks, need 40 billion to 50 billion of capital injections. Nomura reported Spain's banking system could need a further 220 billion euros in capital if a tougher measure was used for provisions for losses on Spain's collapsing property market.
Spanish stocks fell 2.2% overnight, including a 30% fall in Bankia shares.
As if it couldn't get worse for Spain, prices of olive oil have slumped to a 10 year low after a bumper crop from Europe's largest producer. See more here at FT.com
Meanwhile, US markets were closed overnight for Memorial Day holidays. Currencies were steadier with some hopes that pro-bailout in parties in Greece may win June 17 elections, given they are ahead in the latest polls. The chances of a 'Grexit' from the euro zone are seen lower if the pro-bailout parties win.
The New Zealand dollar was firm and steady over 76 USc in morning trade.
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