Spain's borrowing costs rose as it tapped the debt market on Wednesday for the first time since the eruption of a corruption scandal that has implicated top members of the ruling Popular Party including Prime Minister Mariano Rajoy.
The Treasury raised 4.61 billion euros ($6.25 billion) in medium- and long-term sovereign bonds, with demand outstripping supply by two to one, the central bank said in a statement.
The government had expectd to raise 3.5-4.5 billion euros in the auction.
Leading centre-left newspaper El Pais last week published account ledgers allegedly kept by two former treasurers of the Popular Party that purportedly show that at least a dozen senior party officials, including Rajoy, received payments from a secret slush fund.
The right-leaning Popular Party has denied the allegations, which have sparked calls for Rajoy to resign and have raised questions about his government's ability to implement austerity measures to get Madrid's finances in order.
"Spain has started its 2013 sovereign financing cycle aggressively, with the Treasury able to breach its targeted range in four of the first five debt auctions held so far," said Raj Badiani, an economist at IHS Global Insight in London.
"Nevertheless, the recent political tensions with the Prime Minister Rajoy facing corruption accusations made the latest debt auction the most uncomfortable of 2013, and have dented some of the mounting optimism arising from Spain’s brisk start to its primary debt activities."
The risk premium that measures the difference in rates on the open market between Spanish 10-year bonds and safe-haven German ones crept up at the beginning of the week due to investor concerns over the political uncertainty caused by the corruption scandal.
It jumped by 30 basis points on Monday to 383 points and stood at 379 points on Thursday after closing at 382 points a day earlier.
The Treasury raised 1.95 billion euros in an auction of two-year bonds with the yield rising to 2.823 percent from 2.476 percent at the last similar auction held in January.
It brought in 2.07 billion euros in a sale of five-year bonds with a yield of 4.123 percent, up from 3.77 percent in January and another 593 million euros from the sale of 16-year bonds at a yield of 5.787 percent.
The last time Spain sold a 16-year bond was in January 2010 and the yield this time around is not comparable to that auction.
The Treasury estimates its gross financing needs at 215-230 billion euros in 2013, after it borrowed a total 249.6 billion euros in 2012.