Falls in bond prices and rises in profitability. The interest on the long-term debt of the Public Treasury in Spain rises this Tuesday to levels not seen in years. Specifically, the yield on the 10-year benefit shoots up to 3.7% for the first time since January 2014, while the 15-year sovereign bonds of the same issuer are close to 4%.
The fall in prices -which moves in the opposite way to profitability- occurs after knowing the latest inflation report in Spain. According to the INE, the economy broke the downward trend of recent months and the CPI has rebounded from 5.9% to 6.1% in the general index. If more volatile items like energy and fresh food were excluded, the base went from 7.5% to 7.7%, its highest level in four decades.
As ‘La Información’ published on Monday, the tailwinds on the fixed income markets date back to the resurgence of inflation in the US. Last Friday it was learned that the PCE price index, which measures personal consumption spending, has risen 4.7% year-on-year and 0.6% compared to the previous month, projecting the latent pressures on prices that the Fed seeks to avoid and can lead to raise rates more than expected. Before the opening of Wall Street, the interest on the US 10-year bond reaches 3.92%.
The rise in debt yields -and investor sales- is widespread in all reference assets. The same-term French bond, which also learned on Tuesday that its inflation rose to 6.2%, marks a yield of 3.11%, while the German bund moves at 2.64%. The worst part is taken by Italy, which now pays 4.5% in the secondary market to investors who understand their debt, while the Greek (4.4%) and the Portuguese (3.5%) are below .
The tension in the wholesale financing markets has also become visible in loans between banks. The 12-month Euribor, which acts as a reference for variable mortgages, shot up this Tuesday to 3.72%, the highest since 2008, after closing the February average at 3.53%.