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Spain eyes support from banks | IFRe

Spain is expected to strong-arm its banks into buying more government debt in exchange for aid, after Madrid was forced to borrow up to €100bn from its European partners to bail out its banks, adding to the nation’s debt and making future bond sales more difficult.

Yields on 10-year Spanish debt breached 7% last week, amid concerns that the loan would subordinate existing bondholders and increase Madrid’s debt to peak at about 95% of GDP. Banks there have already replaced an exodus of foreign creditors as lenders to the Spanish government, a trend the country hopes will continue…

It is not clear, however, how much firepower Spanish banks have left. Much of the €325bn still owed to the European Central Bank has already been used to pay down debt or invested in Spanish government bonds. Additionally, fresh bailout capital is likely to come in the form of bonds from the European Financial Stability Facility, meaning banks will have no new cash to spend.

via Spain eyes support from banks | Top News | IFRe.

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