Bloomberg News

Spain Sells 4 Billion Euros of Bonds, Meeting Maximum Target

June 02, 2011

(Updates with comments from analyst in fourth and last paragraph.)

June 2 (Bloomberg) -- Spain sold 4 billion euros ($5.8 billion) of bonds, meeting the maximum target the Treasury set for the sale and sending Spanish bonds higher.

The Treasury in Madrid said it sold 2.75 billion euros of three-year bonds at an average yield of 4.037 percent, compared with 3.568 percent the last time the securities were auctioned on April 7 and 4.118 percent on the secondary market before the sale. It also sold 1.2 billion euros of four-year debt at an average yield of 4.23 percent.

Demand for the three-year bonds was 2.49 times the amount sold, compared with 1.79 last month, and the bid-to-cover ratio for the longer-maturity debt was 2.9.

“The auction went well as they usually do in Spain,” said Harvinder Sian, a senior bond strategist at Royal Bank of Scotland Group Plc in London. “This week European buying has been significant, given positive news of a possible bond rollover as a pillar of a new aid package to Greece.”

“There is also a domestic audience in Spain which tends to participate in auctions to support bond prices,” Sian said.

Spain’s Socialist government is trying to shield the euro region’s fourth-largest economy from the sovereign-debt crisis as expectations of a Greek debt restructuring grow. Moody’s Investors Service downgraded Greece’s sovereign-debt rating to Caa1 from B1 yesterday and said the country’s risk of default was 50 percent.

The yield on Spain’s benchmark 10-year bond fell after the sale to 5.323 percent, narrowing the gap between Spanish and German borrowing costs to 233 basis points compared with 238 before the sale. That compares with a euro-era record of 298 basis points on Nov. 30 and an average of 15 basis points in the first decade of monetary union.

--Editors: Fergal O’Brien, Eddie Buckle

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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