Spain debt woes spur flight out of risk assets to U.S. bonds, dollar


31/05/2012 07:55 AST  Guardian.co.uk

Shares and commodities slid while the euro fell to its lowest in almost two years against the dollar on Thursday, as surging borrowing costs in troubled Spain heightened fears that it would not be able to rescue its banks and may have to seek a bailout.

Investors fled from risk assets to U.S. government bonds, with the benchmark 10-year Treasury yield falling below 1.6 percent in early Asian trade on Thursday, its lowest in at least 60 years. The 10-year Japanese government bond yield hit a nine-year low of 0.810 percent. Oil prices extended losses after falling more than 3 percent on Wednesday and copper hit 2012 lows.

"Investors were already exposed to the problems in Spain, but what really disturbed the market were oil prices and U.S. bond yields which broke out of range to hit long-period lows," said Lee Seung-wook, an analyst at Kiwoom Securities.

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