Spanish bond yields rise as debt worries grow

Spanish bond yields rose higher on Thursday after investors continued to worry about the European nation's ability to meet its budget projections.

The spiking Spanish 10-year bond yields, which reached 5.84 percent, are likely continue in the near term, a phenomenon that has increased worries about the ability for some eurozone countries to meet debt obligations.

Bond yields and prices of bonds are inversely related.

Spanish yields reached their highest levels since the European Central Bank made the first of two loan injections that will act as a bulwark against a eurozone credit crunch by adding needed liquidity, reported the Financial Times.

There is now fear that the Central Bank's actions may be fading after giving a boost to the region's economies earlier in the year.

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"There's been a lot of negative news on Spain over a sustained period of time but market sentiment was being buoyed by strong auction results until yesterday," said Rabobank rate strategist Lyn Graham-Taylor, according to Reuters.

"It's quite a dangerous time and if the market starts to panic then the sky's the limit (for borrowing costs), although you may see some policy action come into play."

According to Reuters, despite being stripped of its AAA credit rating this year, French bond yields have yet to suffer a similar fate.