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IBEX Jitters despite satisfactory bond sale

Source: El Pais - Fri 5th Aug 2011

The ECB yesterday attempted to bolster confidence in the economy of Spain's with its president going a far to suggest that they may consider buying Spanish bonds. This never actually happened, but it seem that the speculation alone was enough to encourage the sale of 3.3 billion euros in bonds.

However, there was still uncertainty in the market. The Ibex-35 had it's worst performance of the year, and Spain's risk premium broke the 400 point mark for the third consecutive day, closing at 398 points above the German benchmark bund.

The PM referred to the debt auction as "satisfactory" and asked his advisors to keep in constant touch with their European counterparts to avoid more market turbulence.

Prior to the bond sale, ECB president Jean-Claude Trichet, announced that the European Central Bank would reactivate its dormant bond-buying program in financially troubled euro-zone nations. But according to agencies such as Bloomberg and AFP, the central bank has only purchased bonds from Portugal and Ireland - two nations that have already received significant bailout packages.

However, the news wasn't enough to prevent the markets from losing ground. The Ibex 35 shed 351.20 points, or 3.89% closing at 8,686.50 points - a new record low not seen since the beginning of June 2010.

The news doesn't bode well following forecasts that the USA and Europe are heading toward a new recession.

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