Spain enjoys successful bond sale after tough week

Spain
successfully raised 2.1 billion euros (£1.7bn) today from
the bond markets — but at higher interest rates as investors remained
concerned the country might still need external help to shore up its
troubled banking sector.

The Treasury paid an average interest rate of 6 per cent to sell 611 million euros in key 10-year bonds, up from 5.7 per cent in the last such auction on 19 April. The rate is still lower than the 6.1 per cent being demanded on the secondary market, where issued bonds are traded openly and the rate is seen as an indicator of investor wariness.

The interest rate — or yield — demanded by investors has soared in recent weeks to as high as 6.7 per cent on fears over the country's creditworthiness. A rate of 7 per cent is considered by market-watchers as unsustainable over the long term — and the point at which Greece, Ireland and Portugal had asked for a bailout.

The successful sale came just days after Spain made its most explicit signal that it needs help from Europe for its struggling banks while Finance Minister Cristobal Montoro warned that the high risk premium of recent weeks indicated "the door to the markets is not open for Spain."

AP