Spain and France sold nearly all the bonds they had offered at auction today although the sales proved that investors still want a premium for all but the safest euro zone debt.

Spain's Treasury sold almost €4 billion of three bonds and, while rates hovered close to nine-year highs, investors were more enthusiastic than when Italy visited the market on Tuesday.

Markets had feared a repeat of Italy's auction of long-term bonds at which the Treasury was forced to offer record interest on 5-year paper.

"It is quite positive, they were able to issue an amount that is very close to the maximum expected at a bid to cover a bit lower than we had in May," Alessandro Giansanti, rate strategist at ING, Amsterdam said of the Spanish auction.

France sold a total of €9.8 billion in nominal and inflation-linked paper. While yields fell, demand was slightly lower than recent auctions, suggesting that worries over the banking sector have curbed investor appetite.

Opinions on the French auction were mixed. "French auctions saw issuance at the very top end of the indicative range...Cover ratios were, however, soft," said Richard McGuire, strategist, Rabobank, London. "Recent rising concern over the health of French banks may have had a part to play in these soft cover ratios."

But some analysts said it still showed France was a good bet compared to its peers. "It confirms this trend again that there's still more than robust demand for short-dated triple-A paper. You can argue a lot about France's rating but ... everybody is comfortable in buying France instead of picking up a couple of basis points over Bunds in the other triple-As," WestLB strategist Michael Leister said.

Reuters