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By Simon Miller

Spanish bonds hit a euro-era high this afternoon as investors cast doubt over the €100bn (£81bn) bailout package.

The country’s 10-year bonds hit a high of 6.853% before trading back around 6.686 after investors echoed concern that private debt holders would be subordinated on their debt if the money comes from the European Stability Mechanism and the cost of borrowing goes up as Spain’s public debt levels rise. The previous high of 6.8% was in November 2011.

Further pressure came as Fitch downgraded 18 banks over the continuing concerns over their bad loan exposure.

Italian ten-year yields also rose above 6% as its investors fear that a government debt auction to be held later this week will suffer due to the jittery market conditions.

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