Demand tepid as Spain raises $6.2B in bond sale

AP News
Posted: Nov 03, 2011 9:21 AM
Demand tepid as Spain raises $6.2B in bond sale

Spain raised euro4.5 billion ($6.2 billion) in two debt auctions Thursday, with increased interest rates and weak demand showing investor unease amid the Greek debt crisis.

The treasury sold euro2.93 billion in five-year bonds with an average yield of 4.84 percent, up from 4.48 percent in the last such auction Sept. 1.

It also sold euro1.56 billion in bonds maturing January 2014 at an average interest rate of 4.27 percent.

Demand in both auctions was just over 1.5 times the amount supplied, while the amount sold was at the top of the targeted range.

The sale was the first in Spain since Greece's bombshell announcement that it will put the latest European Union debt rescue package to a popular referendum.

The proposal shot the spread between Spanish 10-year bonds and the German equivalent up by more than 30 basis points to 370 basis points this week although it settled back to 360 points Thursday with a yield of 5.5 percent.

Spain's borrowing costs have soared over the past year because of jitters Spain might be the next country to need a bailout, after Greece, Ireland and Portugal.

The sale came as the Labor Ministry said the number of people filing for unemployment benefits rose by more than 134,000 last month. The increase raised the total seeking benefits to 4,360,926 and marked a 3.2 percent increase from September.

October is often bad for employment being the first month after the summer vacation. October's rise was the biggest for the month since 2008.

The jobless rate stands at a 15-year high of 21.5 percent and the economy posted zero growth in the third quarter. The Bank of Spain says the stagnation is bad news for government efforts to meet deficit-reduction goals.

The overall number of people unemployed in Spain is 4,978,300. It is different from the jobless claims figure because it includes people whose benefits have run out.

Spaniards are expect to punish the governing Socialist party in Nov. 20 general elections by handing the opposition conservative Popular Party a landslide win.

The jobless claim data is the last major economic figure scheduled to be released before the vote.

Meanwhile, austerity measures being taken in much of Spain led to another strike by teachers in four regions. For those in Madrid, it was the seventh school day disrupted since term began in September.