SPANISH government bond yields continued to march higher yesterday as worries over the financial health of Spanish regions intensified, increasing the likelihood that the country will need a sovereign bailout.

    Analysts pointed to press reports over the weekend which said that six Spanish regions are set to request aid from the central government, following in the footsteps of Valencia, which said Friday that it would need such assistance.

    Short-dated Spanish government bond yields surged in early trade, with the yield on the two-year bond climbing around 78 basis points to 6.36 percent by press time. The five-year bond yielded more than 7 percent for the first time since the euro’s inception, while the 10-year yield continued to climb, trading up at a fresh euro-era high of 7.45 percent.

    Yields on shorter-dated securities rose at a faster clip than longer-dated bonds in Greece, Ireland and Portugal before they sought external assistance.

    The difference between Spanish and German yields widened to more than 600 basis points, underscoring the disparity within the 17-country euro zone, while the cost of insuring Spain’s debt against default hit a fresh record high yesterday.

    “This continued escalation in yields has left Spain looking more and more like it will require a sovereign bailout,” said analysts at Rabobank.

    But they added that such an outcome would only turn the market’s attention to Italy, whose yields also rose sharply yesterday. Five-year Italian debt yielded 5.87 percent, up 33 basis points, while the 10-year was quoted at 6.355 percent.

    This flight-to-safety sent yields plunging on assets perceived to be safe. The yield on the 10-year U.S. Treasury note fell to a record low of 1.411 percent.

    German Bunds and U.K. gilts also rallied, with 10-year yields on both within touching distance of their lowest levels on record.

    The 10-year German Bund yield was three basis points lower at 1.13 percent, according to Tradeweb, near a record trough of 1.11 percent. The corresponding gilt yield was three basis points lower at 1.445 percent, just a shade above the record low of 1.44 percent.

    The euro tumbled below 95 yen for the first time in almost 12 years yesterday as dealers rushed to the safe-haven Japanese unit owing to growing fears about Spain’s debt crisis.

    The euro dipped as low as 94.24 yen in afternoon Asian trade — its lowest level since November 2000. (SD-Agencies)