ECONOMY

Risk premium below 200 basis points for first time in two-and-a-half years

Differential between Spanish and German benchmark bonds at pre-Portuguese bailout levels

Spain’s risk premium on Friday fell below 200 basis points for the first time in over two-and-a-half years as investor confidence in the country continued to improve.

The differential between the yield on the benchmark 10-year government bond and the German equivalent closed down about 10 basis points at 193 basis points, levels not seen since Portugal sought a bailout from the IMF and the European Union in 2011.

The yield on the benchmark bond was below 4 percent, compared with levels of 7.5 percent at the height of the crisis in July 2012 before the European Central bank’s pledge to do everything within its power to save the euro.

“It’s a sign of belief that the worst is over,” Bloomberg quoted John Wraith, a fixed-income strategist at Bank of America in London, as saying.

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