Spain managed to beat its targets for an auction of medium-term debt, but at sharply higher interest rates, in its first bond sale since its credit rating was downgraded over fears that it may seek a bailout.
The Treasury sold (EURO)2.52 billion ($3.3 billion) in 3- and 5-year bonds Thursday. It had set a target range of (EURO)1.5 billion to (EURO)2.5 billion.
The Treasury sold (EURO)978 million in three year bonds at an average interest rate of 4 percent, up from 3.5 percent at the last such auction on April 19.
It also sold (EURO)1.54 billion in two categories of 5-year bonds. The yields were 4.75 percent and 4.96 percent, up from 4.3 percent on April 4.
In the secondary market, the yield on Spanish 10-year bonds stood at 5.82 percent, virtually unchanged from Wednesday's close.
Spain _ in recession, and with a 24.4 percent jobless rate and banking sector heavily exposed to an imploded real estate market _ is the focus of the latest bailout fears hounding the eurozone.
Late last week, S&P downgraded the country's credit rating by two notches from A to BBB+, citing a worsening budget deficit, worries over the banking system, and poor economic prospects.
Marc Ostwald of Monument Securities said the auction was a mixed bag: good in that Spain reached its target and the bond sale was oversubscribed. But he said it was disappointing that Spain did not sell more than (EURO)2.52 billion in the face of such high demand.
Ostwald also wrote that the average yields on the bonds auctioned Thursday were higher than those being traded on the secondary market.