A sign that EU debt crisis is fading

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Paris - Spain's interest rate for borrowing 10-year funds fell below 3.0 percent on Friday for the first time since 2005, in a further sign that the eurozone debt crisis is fading.

On the secondary market, where debt already issued is traded, the interest rate or yield indicated by the rising value of the bonds fell to 2.996 percent briefly during morning trading, but then rose to 3.0 percent.

The yield on existing debt is a baseline indicator of what a country must offer to raise funds the next time it issues equivalent bonds.

Ten-year bonds are considered to be the main barometer of a country's standing on the eurozone bond market.

As confidence in the creditworthiness and general state of an economy rises, in this case regarding eurozone member Spain, investors become more inclined to buy the bonds for the fixed income stream they carry.

As the price of the bond rises, the fixed interest falls automatically relative to the new higher value of the bond.

Spain, the eurozone's fourth-largest economy, emerged from its downturn last year after a decade-long property bubble burst in 2008, tipping the economy into a double-dip recession and wiping out millions of jobs.

Sapa-AFP


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