Risk premium jumps on ECB comments on bond purchases
As expected, the European Central Bank on Thursday cut its key lending rate by 25 basis points to 1.0 percent, but comments by the bank's president Mario Draghi that the ECB will not step up its bond-purchase program caused Spain's risk premium to jump and share prices to fall.
The spread between the yield on the Spanish benchmark 10-year government bond rose 47 basis points to 378 basis points after having fallen earlier this week back below 300 basis points.
The Spanish blue-chip Ibex 35 shed 2.12 percent to 8,461.20, in line with falls in the rest of Europe.
Investors' eyes were firmly set on the outcome of the European Union summit in Brussels, where the region's leaders are seeking an agreement to solve the euro-zone sovereign debt crisis.
In order to alleviate the banks' delicate liquidity situation, the ECB said it would also hold two extraordinary tenders for 36-month loans with no limits to the amount lenders can ask for.
Separately, the European Banking Authority on Friday confirmed Spanish banks need 26.17 billion euros to meet the new solvency requirements.
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