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Investors show healthy appetite for Spanish bonds, Treasury raises $3.33BN in sale
MADRID (AP) ' Investors showed a healthy appetite for Spanish debt but demanded a higher premium in an auction that was a key test of confidence in the government's ability to get a handle on its debts as its economy enters a recession.
The Treasury auctioned '2.54 billion ($3.33 billion) in 10-year bonds and notes maturing in 2014. It had set a target range of '1.5 billion to '2.5 billion.
The yield on the 10-year bond was 5.7 percent, up from 5.3 at the last auction on April 4. This time demand was more than double the amount sold.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
MADRID (AP) ' Spain will be in the spotlight later Thursday when it auctions up to '2.5 billion ($3.3 billion) of its bonds, in a key test of investor confidence in the government's plans to get a handle on its debts.
Most interest will center on what interest rate the 10-year bond issue reaps. Over the past couple of weeks, Spain has become the epicenter in Europe's debt crisis, with investors becoming increasingly concerned over whether the new conservative government can push through its austerity and reform program at a time of recession and sky-high unemployment.
Earlier this week, the yield on Spain's 10-year bonds spiked above 6 percent, toward the levels that forced Greece, Ireland and Portugal, into seeking outside financial help. The problem for the other 16 countries that use the euro, however, is that Spain's economy is about double the size of the three bailed-out countries, meaning that it will cost much more to bail out.
"Markets are becoming increasingly worried that, in the absence of a much bigger firewall than the one which is currently available, Spain will find itself in a similar situation to Greece, only without the luxury of a bailout to fall back on," said Michael Hewson, senior market analyst at CMC Markets.
Markets across Europe were cautiously upbeat ahead of this morning's auction, partly because the amount Spain is trying to raise is not huge. The Stoxx 50 index of leading European shares up 0.6 percent and Spain's ten-year yield was down a further 0.03 percentage point to 5.78 percent.
France is planning to raise '11 billion on Thursday but there are few market concerns over the country's ability to finance itself.