The eurozone debt crisis has once again taken the spotlight amid worries that Spain may have difficulty servicing its debt. Analysts say that the country’s economic recession may worsen as the government implements tough austerity measures, making it increasingly difficult to pay lenders back.
Spain sold one-year and 18-month paper on Tuesday. Demand for both bills was strong, with the Treasury seeing bid-to-cover ratios above those notched in March, according to a report by the Wall Street Journal. Still, the yield on each nearly doubled. A more important auction of longer-term bonds is on tap for Thursday. The yield on 10-year bonds in the secondary market fell to 5.94% after closing above the 6% mark for the first time since the European Central Bank stepped in to catalyze banks’ buying of sovereign debt.
Also on that front, the International Monetary Fund said it sees the eurozone economy contracting by 0.3% in 2012 and then bouncing back and expanding at a pace of 0.9% the following year.
Traders also had two economic reports to digest.