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Contagion risk in Europe is back on the agenda, not even a month after a debt swap that saw Greece sheltered from a messy default after a second liquidity-boosting operation from the European Central ...

Contagion risk in Europe is back on the agenda, not even a month after a debt swap that saw Greece sheltered from a messy default after a second liquidity-boosting operation from the European Central Bank.
Among the euro zone periphery countries, Spain is creeping up again as the big, sick member of the area and a recent rise in Spanish bond yields is a sign that its illness is unlikely to be cured soon, analysts told CNBC.com on Thursday.
Italian 10-year bond yields rose 7.9 basis points on the day on Thursday, to 5.08 percent but they were overtaken by Spanish 10-year bond yields, which were 5.49 percent, up 7.2 basis points on the day according to Reuters data.
On Friday morning, Spanish 10-year bond yields were hovering around 5.47 percent while Italian bond yields were around 5.07 percent.
“It’s the contagion risk,” Jeffrey Alldis, a trader at ACT Currency Partners in Zurich told CNBC.com.
“It’s possible that other countries like Spain, Italy and Ireland want the same thing” as the deal Greece got to restructure its debt, Alldis added.
“We’re seeing the expectation of volatility increasing which also tells us that uncertainty is rising,” he said.
Spreads of credit default swaps – the cost of insuring against default – were 433.12 for Spain and 376.6 for Italy on Friday morning.
After the European Central Bank’s second Long-Term Refinancing Operationon the last day of February, some analysts said that the European debt crisis was over as banks would use the money – lent to them at the bank’s record low rate of 1 percent for three years – to buy the sovereign debt of the stricken euro members.