Euro and Bund Yields fall on Spain

Germany’s 10-year bond yield hit a fresh record low while the euro edged towards its weakest in two-years on Tuesday as doubts grew over Spain’s plan to recapitalise its banks and obtain finance for its struggling regional governments.

U.S. stock index futures pointed to a higher open on Wall Street following the holiday weekend, with expectations high that new data on the economy, including Friday’s key jobs report, will show the recovery remains on track.

But the deepening euro zone debt crisis overshadowed hopes for U.S. growth or for stimulus measures from China.

“The bad news just keeps coming and if Spain were to ask for a bailout we would see the euro come under more pressure,” said Steve Barrow, head of G10 currency research at Standard Bank.

The euro traded at $1.2530, not far from last week’s low of $1.2495.

Fears that Spain could need outside help grew after a Spanish government source told Reuters that it planned to issue new debt to recapitalise troubled lender Bankia.

The source also said the government would ask the Treasury to issue and distribute debt to the regions under strict conditions of meeting deficit targets and implementing austerity plans.

Benchmark 10-year German Bund yields fell as much as 1.7 basis points after the report, touching a new low of 1.347 percent. The June Bund futures contract also hit a record high of 144.58.

Reuters

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