The cost of borrowing for the eurozone’s peripheral economies rose to record highs on Thursday amid signs the debt crisis that forced Ireland into a multibillion-euro bail-out was spreading, the FT reports. Irish, Portuguese and Spanish bond yields surged to their highest points since the launch of the euro, as traders said even some of the bigger eurozone countries could soon be affected. Matt King, global head of credit strategy at Citi, said the danger was the selling could develop a momentum of its own. “The moment you have even a flicker of a doubt about default risk, it becomes rational to reduce positions in a larger country like Spain purely on grounds of diversification,” he said. Some traders warned that contagion could even spread to the core eurozone debt markets of France and the Netherlands. Don Smith, economist at Icap, said: “Wildfire can be very difficult to put out. The contagion could eventually spread all the way to France. The markets are very nervous.”
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