Risk premium below 400 basis points for first time in a month

Spain’s risk premium fell on Wednesday below 400 basis points for the first time in a month after Brussels announced the restructuring plans that will be imposed on nationalized banks that will receive European funds to help them recapitalize and repair the damage they suffered from their ruinous over-exposure to ailing real estate.

The spread between the yields on the Spanish benchmark 10-year government bond and its German equivalent narrowed 12 basis points from Tuesday to close the session at 395 basis points. The last time it achieved this feat was on October 25. The yield on the 10-year bond fell to 5.3 percent.

The risk premium is over 200 basis points below the levels it stood at in July before the European Central Bank (ECB) pledged to do everything within its powers to save the euro. It subsequently unveiled a program to buy the sovereign debt of financially distressed euro-zone countries but insisted on them asking for assistance from the European Stability Mechanism (ESM) in order to activate such intervention.