Spain's Treasury issued €2.5 billion in two- and 10-year bonds today, at the top end of the targeted amount and on solid demand, though yields ticked higher than on the longer dated paper than a previous auction in January.

However, yields on both bonds came in slightly below that registered on the secondary market just before the primary sale.

The Treasury sold €1.1 billion of a bond maturing October 31st, 2014 at an average yield of 3.463 per cent and a bid-to-cover ratio of 3.3, compared to a ratio of 2.0 at the last auction in October.

Spain also sold €1.4 billion of the benchmark bond due January 31st, 2022, at a yield of 5.743 per cent. The bond was 2.4 times subscribed, after 2.2 times at the last primary auction in January when the bond sold at an average yield of 5.403 per cent.

Spain entered its second recession since 2009 in the first quarter after more than four years of contraction or minimal growth following a burst property bubble and more than a decade of strong expansion.

The economic slump turned a budget surplus in to one of the euro zone's highest deficits in just two years and the government has been struggling to convince markets it can rein in the shortfall ever since.

Debt costs for the Spanish Treasury have jumped since prime minister Mariano Rajoy ripped up a deficit target previously agreed with Spain's European partners. While he reached an accord on the shortfall for this year and next, many economists say the target is not realistic.

Spain must cut a deficit which was 8.5 per cent of gross domestic product in 2011 to 5.3 per cent of GDP this year and 3 per cent in 2013. The International Monetary Fund said on Tuesday it didn't expect the 3 per cent deficit target to be achievable by at least 2018.

Reuters