Spain's borrowing costs dipped in a bond auction Thursday, easing concerns that a feared banking meltdown in Cyprus could scare investors away from other troubled eurozone states.
Spain's treasury raised 4.513 billion euros ($5.8 billion) in a sale of two-, five- and 10-year bonds, exceeding its own target range of 3.0-4.0 billion euros as demand outstripped supply by nearly three to one.
The rate of return demanded by investors eased slightly from similar bond issues in the past month.
"This was an encouraging debt auction, and suggests that Spain's aggressive start to its 2013 sovereign financing cycle is unlikely to be knocked off course by events in Cyprus," said Raj Badiani, London-based analyst at research house IHS.
Events in Cyprus remained "unpredictable" after its lawmakers rejected a one-off levy on all bank deposits in return for a 10-billion-euro European bailout, Badiani said.
"Encouragingly, the Spanish treasury has conducted two successful debt auctions since the crisis flare up in Cyprus, and after today's bond auction has completed 34 percent of its total 2013 medium-and long-term bond issuance schedule," he added.
Spanish borrowing costs have dropped significantly since the European Central Bank last September vowed to intervene on the markets if Spain sought its help.
Prime Minister Mariano Rajoy, a conservative, resisted pressure last year to seek a sovereign bailout or ask the ECB for help, though he praised the central bank for offering important support.
Investors have also been reassured by Spain's announcement that it curbed the public deficit to 6.7 percent of annual economic output in 2012 from 9.4 percent in 2011.
A key measure of investors' perceptions of the risk of investing in Spain, the extra rate of return demanded on Spanish government 10-year bonds compared with that of benchmark German Bunds, eased to 349 basis points in early afternoon trade from 359 points at Wednesday's close.
A Bank of Spain report on the latest bond sale showed that Spain sold 2.325 billion euros in benchmark 10-year bonds, offering a yield of 4.898 percent, down from 4.917 percent in the previous comparable auction March 7.
Spain also raked in 1.032 billion euros in the sale of five-year bonds, which offered a yield of 3.557 percent, down from 3.572 percent on March 7. The treasury brought in another 1.156 billion euros in the sale of two-year bonds, offering a yield of 2.275 percent, down from 2.54 percent on February 21.