Spain's bond yields hit euro-era high Spain's borrowing costs reached a new euro-era high on Monday as fears about the country's wilting economy and government finances outweighed the eurozone's approval of loans to help Madrid recapitalise its banks. The yield demanded by lenders on benchmark 10-year debt issued by Madrid rose 25 basis points to 7.52 per cent, above the 7.285 per cent peak touched earlier in the crisis, according to Bloomberg data. There were records across the yield curve, with Spain's two-year notes yielding 6.55 per cent and its five-year borrowing costs touching 7.35 per cent. Credit default swaps on Spain jumped to 632bp, taking the cost of insuring against default on the country's sovereign debt to new highs. Yields on so-called haven assets in the UK and Germany were again flirting with record lows. The yields on 10-year gilts hit 1.44 per cent, while 10-year Bunds were trading at 1.14 per cent. Analysts said that the sharp jump in borrowing costs for Spain reflected fresh investor concerns as attention switched from problems in the banking system to the wider economy. Last week the region of Valencia requested emergency aid from the central government. Growth figures have also disappointed. On Monday, the Bank of Spain said that the Spanish economy had contracted 0.4 per cent in the three months to June, compared with the previous quarter. In the first three months of the year the economy contracted 0.3 per cent. On an annual basis the bank said the economy had contracted 1 per cent. Spain is expected to remain in recession until 2014, adding further headwinds to its fight to regain the confidence of financial markets. Gary Jenkins of Swordfish Research said in a note that the yields indicated that "Spain may soon struggle to fund itself in the market and, therefore, unless some positive action is taken the country will need a full bailout." Any secondary market buying by the ECB would be taken as a negative rather than as a positive by the market. He said a more likely outcome was that either the Spanish banks continued to support the government at its bond auctions or that the European Financial Stability Facility or European Stability Mechanism, the eurozone bailout funds, started to buy bonds in the primary market. Spanish government bond auctions have increasingly been largely supported by domestic banks. However, last week's auction of €3bn-worth of bonds was particularly disappointing as demand dipped and yields jumped. Spain has been selling mainly short-dated bonds to reduce its interest rate payments. Rising short-term borrowing costs exacerbated concerns that Madrid may be forced to seek a full sovereign bailout from the eurozone's rescue facilities - in addition to its already agreed €100bn bank rescue. The euro remained under pressure against the dollar, losing a further 0.2 per cent in early trade on Monday to $1.2093 as investors fled for the safety of the US currency.