Interest rates up following Spain bond auction

Spain
successfully sold 3.1 billion euros in medium-and
long-term bonds today but at a sharply higher cost, another sign that
the country is struggling to convince sceptical investors that it won't
need a bailout.

The auction came hours ahead of a European Central Bank meeting at which Spain hopes some measures might be announced that might ease the pressure on its borrowing costs.

The Treasury sold 1.04 billion euro in 10-year bonds at an average interest rate of 6.65 per cent, up from 6.4 per cent in the last such auction July 5. Spain's 10-year bonds have been fetching similar yields on the secondary market for several months now.

The Treasury also auctioned 1.02 billion euro in four-year bonds at a rate of 5.97 per cent, up from 5.54 per cent. It also sold 1.06 billion euro in two-year bonds on a yield of 4.77 per cent.

One good sign was that demand was more than double the amount offered in the four- and 10-year bond sales and nearly three times the amount in the two-year sale.

Spain is in its second recession in three years with an unemployment rate of nearly 25 per cent.

AP