MADRID: Spain paid a slightly lower premium than a month ago to borrow over 10 years at a debt sale on Thursday, selling at the low end of the 3-4 billion euros in longer-term debt it had targetted.
The Treasury sold 2.5 billion euros of a benchmark ten-year bond, and 724 million of a higher yielding 30-year issue -- for which the yield rose -- with bid volumes of close to 6 billion euros in total lower than at previous tenders.
The average yield on the ten-year bond was 5.395 percent compared with 5.472 percent the last time it was sold on April 20. The average yield on the 30-year bond was 6.002 percent, compared with 5.875 percent at the last auction on March 17.
Spain has not had problems shifting its debt this year, but has still not fully convinced investors it can avoid the sort of crisis facing Greece, Portugal and Ireland or that its economy can grow at a decent clip.
Separately, France sold just shy of 8.5 billion euros in three bonds that were well received among investors, showing strong appetite for debt of the euro zone's strongest members.
‘Spain may be decoupled but the contagion effects are clearly still there and in the long run one has to say these aren't fantastic levels for Spain to be financing itself (at) given the sheer volume of debt it's got to sell this year,’ said Marc Ostwald, strategist at Monument Securities.
Thursday's auctions took Spain's issuance in mid and long-term bonds this year to 41.9 billion euros, or close to 45 percent of its total planned.
On Monday European finance ministers signed off on a 78 billion euro package for Portugal, but nerves over the euro zone's debt-laden have been kept alive with ongoing talk that Greece will eventually have to restructure its debt.
‘It's been a good auction in a tough week for Spanish debt. However, a widening in spreads has seen European and Asian accounts come back into the market so there is clearly support for Spanish credit for now,’ said a director at a major bank in London with links to the Treasury.
He conceded though that it was slightly worrying that the 30-year bond yield was now trading above 6 percent.
On Thursday the key risk premium charged on Spain's ten-year debt compared with German benchmark bunds was around 225 basis points, off highs close to 300 hit in January but way above the close to 50 bps level seen before the debt crisis.
The bid-to-cover ratio on the ten-year bond was 1.8, down from 2.1 last time, while it was 2.0 on the longer dated bond, down from 2.1 last time.
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