DEBT MARKET

Risk premium at lowest level in two years

Differential on German bond down to 268 basis points as investors snap up debt in secondary market

Spain’s risk premium, the difference in interest charged on its debt compared with that for the German equivalent, closed at 268 basis points on Tuesday, the lowest level seen since July 2011.

The indicator began the day already hitting a two-year minimum thanks to interest on Spanish bonds remaining stable around 4.4 percent while Germany’s rose above 1.8 percent.

Spain’s risk premium has reduced by half in the past year, having reached an all-time high of 643 basis points at the end of last July over fears that the country might need a full bailout that would threaten the existence of the euro.

The present drop has been made possible by the buying of debt in the secondary market, helped by debt auctions held around Europe on Monday, especially in Italy.

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