MADRID: Spain sold 10-year debt at record low yields on Thursday as it drew strong demand in a triple bond auction, ahead of a European Central Bank meeting when investors will be looking for clues on further easing measures.
The Spanish Treasury raised 3.5 billion euros ($4.3 billion) in total from the triple sale, the top of its target range for sales of between 2.5 billion and 3.5 billion euros.
Expectations have been rising that the ECB could step up asset purchases, including buying sovereign bonds next year, as it tackles weak inflation and faltering growth in the euro zone. That has already buoyed Spanish bonds in the secondary market.
The Treasury paid less than 2 percent for its 10-year paper for the first time as average yields dropped to 1.84 percent at the auction.
The strong auction prompted the premium investors pay to hold Spanish 10-year bonds over the German equivalent to fall by 2 basis points to 109 bps, a long way down from more than 750 basis points at the height of the debt crisis in 2012.
"There will be more spread tightening heading into a quantitative easing announcement or as expectations of further QE grow," said Lyn Graham-Taylor, fixed income strategist at Rabobank in London. Thursday's auction was "pretty solid," he said.
The Treasury surpassed its gross funding goal of 129.3 billion euros for 2014 at the last auction at the end of November, though it said it will look to pre-fund issuance for 2015 and was maintaining its remaining scheduled auctions for this year.
As well as the 10-year paper, the Spanish sold a three-year bond on Thursday at a near record low yield of 0.584 percent and a bond due 2020 at 0.946 percent.
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