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16 June 2011
Spain pulls off debt auction amid contagion worries
, 13:05, Thursday 16 June 2011Spain cleared a funding hurdle as an auction of its debt passed without alarm, despite increasing tensions about bond investors as politicians struggle to reach agreement on a fresh bailout for Greece.
Spain sold €2.8bn (£2.4bn) of its debt at an auction held on Wednesday morning, which was at the lower end of its target range but within the €2.5bn to €3.5bn goalposts it had set.
Of that debt, the Treasury sold €1.5bn of 15-year debt at an average yield - the return which investors receive - of just over 6pc. A similar auction in December saw debt sold with a 5.95pc yield, which shows bondholders are now slightly less keen to take on the debt. Spain also sold €1.3bn of eight-year bonds at an average yield of 5.35pc.
Analysts judged it a fair performance given the turmoil in the eurozone. "Overall it's a pretty decent auction in a tough market environment with all eyes on Greece," said Nishay Patel, debt analyst at Citi.
However, watchers are not confident that Spain can keep refinancing its debt burden at these sorts of prices. Fears about the contagion risk from Greek debt crisis have seen investors demand higher returns to hold the debt of Spain and other eurozone nations seen to be on precarious economic paths, pushing the yields on Spanish 10-year bonds to 11-year highs.
"At least this is another funding hurdle cleared by Spain, but it is coming at increasing price and therefore an easing of the euro debt crisis is needed for Spain to remain on track with its issuance programme," said Orlando Green, a strategist at Credit Agricole (Milan: ACA.MI - news) .
Resource: Yahoo!UK&Ireland Finance
