A journalist works in front of the Stock Exchange's main display while it shows Bankia values, in Madrid Monday June 11, 2012. AP Photo/Daniel Ochoa de Olza)
MADRID (AP) — Spain's benchmark borrowing rate hit its highest since the country joined the euro currency after Fitch credit ratings agency downgraded 18 domestic banks on Tuesday.
Spain's 10-year bond yield rose to hit 6.81 percent in late afternoon trading according to data provider FactSet, while stocks seesawed and began to dip just before markets closed, indicating that investors continued to find more questions than answers in Spain's decision to seek help for its ailing bank sector.
Spain agreed last weekend to take a European bailout for its banks, tapping into a €100 billion ($125 billion) euro area bailout fund, but investors are worried it will not solve the country's problem as the government may have trouble paying the money back.
Fitch said in a statement that its downgrade of the banks was a result of a previous downgrade of the Spanish sovereign debt on June 7. Fitch said it had conducted stress tests, both on the Spanish banking sector as a whole and on individual banks, updating results from tests done in 2011.
The ratings agency said the weakness of the Spanish economy would continue to have a negative effect on business volumes "which, together with low interest rates, will place pressure on revenues."
The rescue package for Spain's crippled lenders was announced Saturday by finance ministers from the 17-country euro area, but the exact amount the country's banks will receive has not yet been published.
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