Spain tests market as debt costs soar

irishtimes.com - Last Updated: Tuesday, June 19, 2012, 10:07

Spain's Treasury paid the highest average yield since the birth of the euro to issue 12-month bills today in a key test of investor appetite for debt from a country many believe will soon be forced to apply for international aid.

Madrid issued 3 billion euros ($3.77 billion) of 12- and 18-month bills, at the top end of its target. The yield for the longer-dated paper was the highest since November when election uncertainty in Spain and global market jitters pushed yields on
the same bill to 14-year highs.

The Treasury sold ?2.4 billion of the 12-month T-bill at an average yield of 5.074 per cent, compared with 2.985 per cent at the last auction for debt of this maturity in May.

The paper was 2.2 times subscribed compared to 1.8 last month.

Spain sold ?639 million of 18-month paper at an average yield of 5.107 percent after 3.302 per cent last month, with bid-to-cover ratio at 4.4, up from 3.2 in May.

Spain faces a harsher test of investor appetite on Thursday when it auctions up to ?2 billion maturing in April 30, 2014, July 30th, 2015 and July 30th, 2017.

The yield on Spanish 10-year bonds hit a fresh high of above 7 per cent yesterday as initial relief over the victory of pro-bailout parties in Greece gave way to ongoing fears of deeper problems facing the union.

Seven per cent is considered too pricey for a country to afford over the long term. Such levels have previously led to bailouts in Greece, Ireland and Portugal.

Treasury minister Cristobal Montoro told the senate during a budget hearing yesterday that European Central Bank should step in to fight market pressure, essentially a call for the bank to buy Spanish debt again, something it is very reluctant to do.

World leaders meeting in Mexico for a G20 summit are expected to push European leaders to outline a lasting strategy to save the euro currency and end financial turmoil.

Reuters?

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