Debt crisis: live

JPM looked at 306 funds linked to one of these "stringent" indices. These account for ?107bn of assets under management, (although JPM does add that this estimate is low, as delving into the bond bucket to tot up all the Spanish bonds would take too long).

Nevertheless, it says:

...only ?3.7bn, i.e. 3.4pc, is directly benchmarked to GBI EMU IG, which is the only index that would generate forced selling in the event of a Moody?s downgrade and according to our index teams, the weight of Spanish bonds in this index is 10%, so the maximum potential selling from it ?370m.

09.20 There's also just two weeks left until Moody's will deliver its verdict on Spain's credit rating. Any downgrade will see the country's bonds fall into "junk" territory - or below investment grade.

But what would this mean for the country's borrowing costs? According to analysts at JP Morgan, not a lot.

Nikolaos Panigirtzoglou and his team have examined the possible impact of a Spanish move to the junk pile

Across major investment grade (IG) sovereign bond indices, JPM?s GBI EMU has the most stringent ratings thresholds. For instance, to be excluded from the EMU IG index JPM requires 1 of 3 ratings to be below IG, Barclays Capital requires 2 of 3 to be below IG, Citigroup requires both Moody?s and S&P to be below IG and iBoxx uses an average rating methodology across all three. Therefore, the most immediate source of selling pressure on Spanish bond yields if Moody?s does downgrade would likely come from funds benchmarked to JPM?s bond indices.

09.00 A Spanish request for aid would cost Italy the equivalent of 1.5pc of GDP, according to the country's finance minister.

Vittorio Grilli told Italian daily La Repubblica that a Spanish request would see "Italy bear the brunt of the cost". The country's public debt had already gone up by 4pc as a consequence of the Greek, Irish and Portuguese bail-outs.

He also repeated that Italy was not planning a similar request for aid. He said:

The country's finances are solid. In 2013 we will meet the goal of a balanced budget adjusted for the (economic) cycle. And this without aid of any sort.

_{Italy's Vittorio Grilli, pictured here with Italian premier Mario Monti, insisted that the country's finances were "solid".}

08.50 So will they or won't they? Speculation this morning is that Spain is preparing a bail-out request for November. A source told Reuters:

We're moving, we're taking steps, we're preparing it, things will crystallise in November.

Another told the newswire:

If I had to bet, it would rather be in November than in October, if ever. Then it would be a package - you would have Greece and Cyprus and Spain. I think not Slovenia.

The is because the Germans and others do not want to go many times to national parliaments and have painful, tortuous debates there.

08.45 Good morning and welcome back to our live coverage of the eurozone debt crisis.

Debt crisis live: archive

Source: http://telegraph.feedsportal.com/c/32726/f/618224/s/247ac9b4/l/0L0Stelegraph0O0Cfinance0Cdebt0Ecrisis0Elive0C960A86970CDebt0Ecrisis0Elive0Bhtml/story01.htm

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