Risk premium eases further on euro crisis hopes

Spain’s risk premium continued to narrow and the stock market extended its rally on Monday after the United States declared its support for efforts by European leaders to save the euro.

Expectations have grown high about possible solutions to overcome the euro-zone crisis ahead of a series of key meetings this week between European leaders and the European Central Bank’s monetary policy meeting. ECB President Mario Draghi last week set the tone by saying: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” That helped push Spanish government bond yields lower and stocks higher.

The yield on the benchmark Spanish 10-year government bond eased further to 6.613 percent after trading well above seven percent last week. The spread with the German equivalent narrowed a further 11 basis points to 523, after hovering at levels of 650 basis points last week. The blue-chip Ibex 35 index added a further 2.78 percent to 6,801.80 points.

US Treasury Secretary Timothy Geithner met Monday with German Finance Minister Wolfgang Schäuble to exchange views on the euro crisis and was due later to meet with Draghi. He also spoke to French Economy Minister Pierre Moscovici by phone.