LONDON: The risk premium on Spanish 10-year government bonds rose to a euro-era high on Friday driven by the market's gloomy assessment of whether the country can avoid asking international lenders for a bailout.
The Spanish/German 10-year government bond yield spread rose to 595 basis points versus 582 bps at Thursday's settlement close.
Traders said there were no large selling flows behind the move which was exaggerated by a thin market, but reflected the prevailing view that Spain's banking bailout was just the first step to asking for a full-blown aid package.
Bund futures rose to a session high of 145.65, up half a point on the day, pushing German yields lower and also driving the gap between German and Spanish yields wider.
"There's a bias for safe haven debt in a very thin market, triple-A countries are performing very well," one trader said. "It's a typical Friday move - Don't be short (of Bunds) on a Friday!"
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