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The economic spotlight has been firmly on Spain and its prime minister, Jose Luis Rodriguez Zapatero, amid fears his country could follow Ireland into needing a bailout. Daniel Ochoa de Olza/AP
Debt Crisis

Has the contagion been stopped? EU bond yields dive

The costs of borrowing for Portugal, Italy and Spain has fallen, easing some fear about the Eurozone debt crisis.

THE COST OF BORROWING for some of Europe’s other faltering economies has fallen, easing fears that the Irish bailout could trigger a domino effect of failing Eurozone nations.

The price of government bonds for Italy, Portugal and Spain has all fallen significantly, with investors apparently spurred by news that the European Union is planning a series of new banking stress tests to evaluate the risk of default in those countries.

At 12:45pm, the cost of ten-year Italian bonds were at 4.525% – still relatively high, though down by 0.142% over the course of the day.

With more immediate benefits, meanwhile, the cost of Iberian borrowing has also from its all-time highs of earlier in the week. Portugal’s ten-year bonds are down by 0.24% to 6.734%, while Spain’s are also well down – at 5.315%, down by 0.188% today alone.

Irish bonds, meanwhile, remain near their all-time high closure yesterday of 9.347%.

European stock markets have also rallied; shortly before 1pm, the UK’s FTSE, the CAC 40 in Paris and the DAX in Frankfurt were all up by over 1%, following progress in Asia where the Hang Seng and the Nikkei both recorded gains.

In pre-trading this morning, the Dow Jones Industrial Average is down by about 0.4%.