Spanish problems won't spark new eurozone debt crisis

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The recent weakness in Spanish bonds is not the start of a new phase in the eurozone debt crisis nor is it likely it will lead to a "new leg down in equities and other risk assets," says Skandia Investment Group's Head of Asset Allocation, Rupert Watson, commenting on the recent sharp selling of Spanish government bonds.

Watson says it’s Skandia’s belief that the problems are largely contained within the affected countries (Spain and Italy) and will not be an impediment to further equity gains. By the end of last week (20.4.12), Spanish 10-year bond yields had risen three basis points up from 5.91% to 5.94% and Italian 10-year yields had risen six basis points up to 5.64%. Watson goes on to explain that the imbalances within the eurozone took years to create, so markets must expect the rebalancing to also take years to complete and is made harder by the inability of the affected countries to devalue t...

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