90 seconds at 9 am: Spanish and Italian bond yields blow out towards 7% as Spailout relief evaporates; Dow up 1.1% on stimulus hope; NZ$ rising to near 78 USc

Here's my summary of the key news overnight in 90 seconds at 9 am, including news that any confidence in the Euro-zone's future after the weekend bailout of Spain's banks through its government has now completely evaporated.

The so-called 'Spailout' was designed to win back investor confidence in Spain's bond markets. Instead investors simply saw the deal adding yet more debt to the Spanish government's balance sheet.

Spain's 10 year bond yield rose to a euro-era high overnight of 6.83%, widely seen as unsustainable. See more here at BBC.

This meltdown in Southern Europe's bond markets is indicative of a widespread capital flight from Southern Europe to Germany. Professional investors fear a break-up of the Euro-zone will mean their savings in Spanish or Italian bonds will be devalued lower into pasetas and lira, so they are moving their euros into German bank accounts and German bonds, assuming their savings would not be devalued if their euros are converted into Deutsche Marks.

As if to emphasise the risks, Fitch downgraded 18 more Spanish banks overnight.

Italy's 10 year yield also rose to 6.28% as investor attention turned to suggestions that Italy, which has 2 trillion euros in government debt, may also eventually need a bailout.

Austria's Finance Minister warned overnight that Italy may need a bailout. See more here at Reuters.

Meanwhile, the Dow rose 1.1% as hopes grew that central bank intervention would boost stocks. See more here at Bloomberg.

The Federal Reserve's Chicago President Charles Evans, a renowned dove, repeated comments overnight he would like to see more stimulus. The US Federal Reserve meets to decide on its interest rates and the possibility of further Quantitative Easing or money printing on June 20, next Wednesday night (NZ Time). See more here at Bloomberg.

This appetite for risk underpinned by hopes of central bank support boosted the New Zealand dollar to 77.7 USc in morning trade. See our interactive chart below. The New Zealand dollar has risen 3 cents in the last week.

Figures were yesterday showing retail spending through credit and debt cards in New Zaland was stronger than expected in May. This will be of interest to the Reserve Bank of New Zealand. As will the 3% rebound in the New Zealand Trade Weighted Index in the last 3 weeks. See more here from Brian Fallow at NZHerald.

Economists expect the Reserve Bank to leave the Official Cash Rate on hold at 2.5% when it releases its decision at 9 am tomorrow morning. Markets have priced in a 15% chance of a 25 basis point cut tomorrow. See Alex Tarrant's OCR preview here.

(Updated with more detail, links, background, local outlook)