June 21 - Spain's medium-term borrowing costs soared to euro-era record levels at an auction, hours before an independent audit was due to reveal how big a capital hole in Spanish banks needs to be filled by a euro zone bailout. Sonia Legg reports.
Another worrying high for Spanish bonds - this time the yield on its five year debt was the highest for 15 years. But there was no shortage of demand - Spain's Treasury easily beat its 2 billion euro debt issue target. The auction showed Spain can still borrow on financial markets, but at a cost, says CVG's Javier Barnueva. (SOUNDBITE)(Spanish) CVG FIXED INCOME SECURITY DIRECTOR JAVIER BARNUEVO, SAYING: "It is a good thing when we think short term because our financial needs seem to be covered. But the interests are high and that means that it won't be sustainable long term." International investors continue to steer clear of Spain. That leaves bond-buying to the domestic banks - many of whom have troubles of their own. That, says Thomas Costerg from Standard Chartered, is a worry. (SOUNDBITE) THOMAS COSTERG, EUROPEAN ECONOMIST, STANDARD CHARTERED, SAYING (English): "We don't see an abatement of the crisis - you could see some positive headlines from policy makers particularly on the bond buying front but you have to realise that there is still strong resistance from northern countries to accept bond buying so we remain very cautious on Spain and Italy." The bond auction was just the beginning of a hectic day for the latest euro zone country in the financial firing line. An audit of independent banks was also being released. And a formal request for aid to shore them up was also expected. Sonia Legg, Reuters