Spanish borrowing costs jumped at a bond auction today, as this week's tough budget failed to calm investors' nerves about the country's finances, while Portugal sold €1 billion in 18-month bills.
Madrid sold €2.6 billion of medium-term paper, at the low end of its target range, and two out of three of the yields rose slightly above analysts' expectations.
"The Spanish Treasury failed to raise the maximum amount and yields, bid to cover ratios are lower than the previous auctions and all in all suggests investors remain very cautious towards Spanish bonds at the moment," said Nick Stamenkovic, rate strategist at RIA Capital Markets.
The average yield on the 2015 bond was 2.890 per cent, up from 2.440 per cent from when it was last sold on March 15, 4.319 per cent on the 2016 bond after 3.376 per cent at the start of March, and 5.338 per cent on the longer-dated bond. It was last sold on September when it had a yield of 5.156 per cent.
European shares extended their losses after the auction and the cost of insuring Spanish and Italian debt against default rose.
The Treasury sold €1.1 billion of a bond maturing in 2015, €973 million of a 2016 bond, and €489 million of a bonds with a 2020 maturity date. The total target range had been €2.5-3.5 billion.
The bid-to-cover ratios were mixed, but still showed firm demand.
Portugal sold €1 billion in 18-month treasury bills today in a successful test of market appetite for the longest-dated debt since it took an international bailout.
The average yield on the new T-bill was 4.537 per cent, compared with 5.993 per cent on the last 18-month bill auctioned in March 2011, before Portugal withdrew from the bond market.
The longest-dated T-bills last issued by Portugal, for 12 months, yielded 3.652 per cent at an auction last month.
The IGCP debt agency also sold 500 million euros in 6-month T-bills at an average yield of 2.90 per cent, sharply down from February's 4.332 per cent.
The total amount of T-bills sold in the auction was at the top of the indicative offer range. Demand outstripped the amount placed by 2.6 times on 18-month bills and 5.0 times on the six-month maturity.
Reuters
