Spain paid lower rates to raise €5.7 billion in government bonds yesterday, a major test in the midst of a deepening eurozone debt crisis.

The average yield for the 12-month bills was 3.335 per cent, down from 3.702 per cent at a similar auction on July 19, and demand outstripped supply two to one.

Demand for the 18-month bonds was three times the amount sold, and the yield was 3.592 per cent, down from 3.912 per cent.

The sale confirmed an easing of rates, helped by the intervention of the European Central Bank which said on Monday it bought a record €22 billion of government bonds last week in a bid to calm a eurozone debt crisis threatening Italy and Spain.

The Spanish Treasury announced early this month it would not hold a bond auction previously scheduled for tomorrow.

Eurozone woes and weak US data have sparked concern that the world could be heading for another sharp downturn.

On August 5, the debt risk premium for Spain and Italy reached a record gap with the benchmark German bond. But the spread, or difference in the rate of return with German bonds, has since eased.

Eurozone debt fears were heightened after preliminary data yesterday showed growth in Spain’s battered economy slowed in the second quarter of 2011.

France’s Nicolas Sarkozy was due to host Germany’s Angela Merkel in Paris yesterday as jittery markets anxiously await any sign that European leaders have a plan to resolve the eurozone’s debt problems.