The euro nose-dived to $1.2267 after demand declined at a Spanish bond auction today. Spain managed to sell €1.36 billion of two-year bonds, €1.07 billion of five-year debt, and €548 million of seven-year bonds totalling €2.978 billion, close to the maximum target of €3 billion.
However, average yield of the two-year government bonds was 5.204%, up from 4.706% at a similar auction in June. The bid-to-cover ratio, which represents demand for Spanish debt, was way lower at 1.9x compared to 4.26x in June.
Rising yields and decreased demand for Spanish government debt indicates that the eurozone crisis has continued to deteriorate. In fact, the ten-year Spanish government bond yield rose above the critical 7% mark today – a level that saw Greece and Portugal seek aid.