Spanish yields rise as ECB 'sugar rush' burns off However, the IMF official added that Portugal's deficit target of 4.5pc of GDP for this year "remains in reach" - despite increasing doubts in Brussels and among traders. The bond markets have been particularly rattled after a disappointing Spanish bond auction on Wednesday. "There's been a lot of negative news on Spain over a sustained period of time but market sentiment was being buoyed by strong auction results until yesterday," Lyn Graham-Taylor, a strategist at Rabobank, told Reuters. In Washington DC, an IMF spokesman, Gerry Rice, told reporters: "The challenges that Spain is facing are severe. Market sentiment remains volatile. This calls for sustaining the reform. Italian bond yields moved higher on Thursday, too, partly due to fears over Spain but also because of concerns that Mario Monti is struggling to execute the economic reforms he has pledged. The yield on the benchmark 10-year bond rose to 5.5pc. In Rome, business and trade union leaders lambasted the labour reforms Mr Monti presented to parliament on Wednesday evening. Italy's technocrat prime minister has already watered down some of the reforms in a bid to get them passed. However, politicians and union bosses are still at loggerheads over the details, particularly over plans to make it easier for employers to fire workers. The continued objections have raised concerns that the laws, which are deemed crucial to kick-starting Italy's economy, may again have to be re-jigged. European stock markets were muted in thin trading ahead of the Easter break. The German Dax fell 0.1pc, the French CAC rose 0.3pc and in London the FTSE climbed 0.4pc.