Tuesday, 27 November 2012 16:45
MADRID: Spain's cost of borrowing for the short-term dropped at a debt auction on Tuesday, helped by improving market sentiment towards Europe's struggling southern economies after Greece agreed a deal opening the way for its latest aid payment.
The Treasury easily sold 4.1 billion euros ($5.32 billion) of short-term debt, just above a target for 3 billion to 4 billion euros after selling 1.5 billion euros of a 3-month Treasury bill, and 2.6 billion euros of a 6-month issue.
The average yield on the 3-month issue was 1.254 percent compared with 1.415 percent a month ago. On the 6-month paper the yield was 1.669 percent, down from 2.023 percent in October.
"It's gone pretty well, with a decent bid-to-cover ratio," said Jo Tomkins, an analyst at consulting firm 4Cast, referring to how demand for the bills from investor related to the amount offered.
Worries over Greece, where the euro zone's debt crisis first erupted in late 2009 and which has already been bailed out by the International Monetary Fund, the European Central Bank and the European Union, had been weighing over the rest of the region.
Spain has showed in recent weeks that it retains access to debt markets when it borrows over both the short- and long-term, backstopped by the European Central Bank's promise to buy struggling euro zone states' debt if they request help.
But funding costs remain high, and analysts expect the country to call for help as its financing requirements stack up heading into 2013.
The bid-to-cover ratio was 3.5 on the 3-month bill, down from 4.3 at the last sale, and it was 2.3 on the 6-month paper, slightly up from 2.0 in October.
Copyright Reuters, 2012