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Spain raises 5.0 bn euros in bond auction at lower rates

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(Globalpost/GlobalPost)

Spain raised 5.03 billion euros ($6.6 billion) euros via the sale of medium- and long-term bonds on Thursday, the top end of its target and at lower interest rates, the latest sign of improved investor sentiment regarding the country's ability to manage its finances.

The Treasury sold 2.435 billion euros worth of 10-year bonds at an average yield of 4.957 percent, down from 5.222 percent at the last similar auction on February 21.

It was the first time that the yield on Spanish 10-year bonds have fallen below five percent since November 2010, the economy ministry noted in a statement.

Spain's borrowing costs have fallen since the European Central Bank announced in September its readiness to buy an unlimited sum of bonds to curb borrowing costs for troubled member states that accept strict conditions.

The risk premium -- the extra rate demanded by investors in Spanish 10-year bonds over the rate offered by equivalent German bonds -- stood at 348 basis points, down from 355 basis points when markers closed on Wednesday.

Investor confidence in eurozone nations declined after a general election in Italy last month resulted in political deadlock, with the majority of voters backing anti-austerity platforms of former prime minister Silvio Berlusconi and comedian Beppe Grillo.

But an agreement reached by European finance ministers on Tuesday to give Ireland and Portugal more time to repay emergency bailout loans has improved sentiment for all heavily indebted nations that use the euro, including Spain.

The Treasury sold 2.026 billion euros in five-year bonds at an average yield of 3.612 percent, down from 4.169 percent during the last comparable auction on February 7.

It also raised 568.9 million euros in three-year bonds at an average yield of 2.68 percent, down from 2.77 percent on January 17.

The Treasury had expected to raise 4.0-5.0 billion euros via the bond auctions, and demand outstripped supply by a ratio of 2.6 to one.

The Treasury has already taken in 35.5 billion euros, or 29.3 percent of the total amount it has planned to raise through medium and long-term bond auctions this year, the economy ministry statement said.

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http://www.globalpost.com/dispatch/news/afp/130307/spain-raises-50-bn-euros-bond-auction-at-lower-rates