Spain pays lower rates in €4.9 billion bond sale

Spain paid sharply lower borrowing rates in a €4.941 billion government bond sale yesterday, in a sign of improved confidence in its creditworthiness after months of financial turmoil.

The Treasury paid yields of 4.050 per cent for 12-month bonds and 4.226 per cent for 18-month bonds, down from more than five per cent in the last comparable auction, it said in a statement.

The amount raised, €4.941 billion, was higher than the €3.25-€4.25 billion as the Treasury took advantage of the lower rates to raise extra money.

Demand from investors was very strong, at more than four times the original offer. Spain’s borrowing costs soared last month due to fears over its high public deficit, raising pressure on the conservative leader Mariano Rajoy who will take power next week after winning a November 20 election.

The risk premium – a key measure of stability reflecting the extra return investors demand to buy Spanish 10-year government bonds over German ones – broke records in mid-November, surging close to five percentage points.

Spain’s next bond sale is on December 15, when it aims to raise €2.5 to €3.5 billion in bonds of up to 10 years.

The Madrid stock market ticked up by 0.39 per cent yesterday morning after a sharp fall of more than three per cent on Monday.