Risk premium below 300 basis points on euro hopes
Stock market also buoyed after Merkel and Sarkozy announce deal on a fiscal union
Spain's risk premium fell below 300 basis points on Monday for the first time since October 17 on renewed hopes for a solution to the euro-zone sovereign debt crisis.
The differential between the yield on the Spanish 10-year government bond and the German equivalent dropped over 62 basis points from Friday to close at 292 basis points. The risk premium hit a euro-era high of 499 basis points on November 17 and has since eased gradually.
German Chancellor Angela Merkel and French President Nicolas Sarkozy on Monday said they had agreed on a fiscal union for Europe that they will present to their EU colleagues on Friday in Brussels. The markets were also buoyed by the approval of a tough austerity budget by the Italian government. The European stock markets also continued to advance, with the Spanish blue-chip Ibex 35 up 1.72 percent at 8,705.80 points.
