Ten year Spanish yields hit euro era highs

LONDON: Ten year Spanish bond yields hit euro-era highs on Friday, as news a region in Spain would apply for the financial help from the central government reinforced worries that the country will eventually run out of funds and need a sovereign bailout.

Spanish 10-year government bond yields hit a euro-era high of 7.32 percent and were last up 29 basis points on the day at 7.31 percent.

Short-dated bonds came under even heavier pressure, with five-year yields rising 46 bps to their highest since the introduction of the euro at 6.93 percent. Two-year yields spiked 62 bps on the day to 5.85 percent, further flattening the Spanish yield curve in a sign of mounting credit worries.

"There's not much selling, just the market's been melting down in the last few sessions," one trader said.

Spain's heavily indebted eastern region of Valencia said on Friday it would apply to Madrid for financial help, overshadowing euro zone finance ministers' approval of the terms of the bank bailout for the euro zone's fourth largest economy.

Italian 10-year yields rose 18 bps to 6.18 percent, coming dangerously close to yields offered on debt issued by Ireland, which has received financial aid. Irish 10-year bonds yielded 6.22 percent.