Financing costs in Spain rose to new record high level since the creation of the euro area after the creditors still want more and higher yields on government bonds.
Reference yield on 10-year bond rose to 6.854 percent per year this morning, and many economists define a similar level as impractical in the long run.
Everything that happens after tonight the international rating agency Moody’s lowered the credit rating of Spain with 3 levels to Baa3 from A3, which is the last level before the non-investment status.
Over the weekend, Spain coordinate bailout for the euro area banking sector worth 100 billion. The hope was that a rescue package to help calm the fears of the financial markets for the stability of Spanish credit institutions and to alleviate the cost of borrowing by the government.
By Moody’s pointed out however that the eurozone plan to help Spanish banks will increase the debt burden of the country.
The agency added that can further reduce the credit rating of Spain in the next 3 months.
If this happens and the rating falls below investment status of the investors who invest in index funds will be forced to sell holdings of Spanish government bonds, which will increase pressure on profitability will increase the cost of borrowing in Spain.