Smaller Spanish banks are losing access to the European repo market due to concerns Spain could be heading for a debt crisis along the lines of EU partner Greece, Reuters quoted a top financial source in Spain as saying today. The repo market is wary of smaller Spanish lenders because of their real estate losses and because they can only offer Spanish government bonds as collateral. The sharp rise in Spain's 10-year government bond yield since mid-May, to a peak of 4.66 percent from below 4.00 percent -- has brought it above the previous high of 4.50 percent hit just before the European Union agreed on a trillion-dollar financial safety net for eurzone countries in early May. "The smaller Spanish banks cannot finance their positions in (Spanish) government bonds through the repo market outside Spain. This shows just how little appetite their is for Spanish government risk outside Spain," the financial source said. -- SPA
