Italian, Spanish bond yields rise to records on debt worries

(PARIS) - The long-term cost of borrowing for Italy and Spain reached record high levels on Monday on concern that the eurozone debt crisis could spread to these two countries, traders said.

The price of debt bonds issued by Italy and Spain fell further, automatically pushing up the indicated yield, or rate, of the fixed interest attached to the instruments.

The rate on 10-year bonds issued by Italy rose to 5.451 percent and on Spanish 10-year debt to 5.797 percent.

These rates were at the highest levels since the creation of the eurozone.

Traders said that several factors were behind the rise in the yields, and particularly a meeting of leading figures in the European Union on Monday to coordinate their positions on a second debt rescue for Greece.

Traders were concerned about signs that the debt pressures which have hit Greece, Ireland and Portugal, could begin to affect Italy and Spain.

Analysts at BNP Paribas bank commented that "investors are giving priority to safe investments and are switching to high quality assets, leaving aside those considered risky."

This trend had been accelerated by the latest weak data on employment in the United States which had raised prospects that economic acvtivity around the world might slow down.

Tension over the US sovereign debt market was also hanging heavily over the bond market.

President Barack Obama and Congress are running out of time to reach a compromise on raising the legal ceiling for US debt so that the nation can continue to borrow to finance its budget deficit.