Spanish stocks surge as debt risk premium eases

Spanish share prices surged yesterday as the risk premium on government debt eased, a day after hitting a record high level on fears of a spreading eurozone crisis.

The Ibex-35 index of heavyweight shares leapt 2.41 per cent to 9,490.5 points in mid-morning trade, led by banks. Number-one bank Santander climbed 4.79 per cent to €7.65 and BBVA rose 5.13 per cent to €7.44.

As debt market fears eased a little, the interest payment demanded in return for investing in Spanish government 10-year bonds declined to 5.3 per cent from 5.5 per cent at Tuesday’s close.

The debt risk premium – the extra interest paid on Spanish bonds compared to safer German bonds – ran at a punishing 2.60 percentage points. The premium had nevertheless eased from a record peak of three per cent the day before.

The share market “remains focused on the public debt risk,” said Spanish brokerage house Renta 4.