Yields on 10-year government bonds of Spain fell below 1% for the first time in the history, which is a new record in the 4-year rally for Spanish bonds. The decline underlines how political risk is overshadowed by the loosening monetary policy of central banks in the developed world. The yields on 10-year government securities fell to 0.99% compared to 7.75% during the debt crisis in the Eurozone in July 2012. The yields fell by more than 0.6 percentage points since June, when Spanish citizens voted in their second parliamentary elections within six months.
The extra yield, or spread, which investors want for their Spanish government bonds instead of similar German, shrank to its lowest level since December 2015.
The investors in government debt prefer the so called peripheral countries of Europe in order to obtain a positive return in a time when more than a third of all bonds of industrialized countries have income below freezing. It is about 8.9 billion USD from total debt of 25.4 billion USD. They’re also speculating that the European Central Bank may expand its 1.7 trillion-euro (1.9 trillion USD) bond-buying program.
Since June 24, the last day before the election, the Spanish government debt rose by 4% until the end of last week. This is more than the average 2.1%, resulting in the Eurozone during this period, and 0.6% for German securities.
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