"Bank credit-default swaps surged near to a record on concern Spanish lenders will have to raise $60 billion to shore up capital as lawmakers struggle to finance a swollen budget deficit.
The Markit iTraxx Financial Index of swaps on 25 European banks and insurers climbed as much as 14 basis points to 208, approaching the all-time closing high of 210 basis points set in March 2009, JPMorgan Chase & Co. prices show. Banco Santander SA, Spain’s biggest bank, increased 23 basis points to a record 258, according to CMA DataVision.
Spanish lenders need as much as 50 billion euros ($60 billion) of capital, according to Banco Bilbao Vizcaya Argentaria SA, as they face mounting writedowns triggered by a housing market collapse and losses on government bond holdings. Civil servants went on strike today to protest at Prime Minister Jose Luis Rodriguez Zapatero’s efforts to tame the euro area’s third-largest deficit.
“There is illness in the Spanish banking system,” said Jeroen van den Broek, head of credit strategy at ING Groep NV in Amsterdam. “It’s very similar to 2008, when the market was hunting down the next bank failure. Now, the market’s hunting the next sovereign fiscal problem.”
The spread between Spanish 10-year securities and German bunds widened 10 basis points to 213 basis points, a level not seen since before the introduction of the euro in 1999. Stocks slumped with Spain’s IBEX 35 Index falling 1.4 percent to 8,669.8, heading for a third straight decline and to the lowest in more than a year. "
at http://www.bloomberg.com/apps/news?pid=20601208&sid=aXWc4pOZTk54
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