Spain's sovereign credit rating was cut for the second time this year by Standard & Poor's on concern that the country will have to provide further fiscal support to banks as the economy contracts.

S&P lowered Spain to BBB+ from A, with a negative outlook. Spain's short-term rating was reduced to A-2 from A-1, New York- based S&P said in a statement yesterday. The yield on Spain's 10-year bond rose 16 basis points to 5.99 percent.

The nation's 10-year borrowing costs have climbed about 70 basis points this year as Prime Minister Mariano Rajoy struggles to convince investors he can control public finances amid soaring unemployment and a contracting economy. Banks threaten to disrupt the premier's efforts as bad loans reach the highest levels in almost two decades.