Bloomberg News

Spain Sells 6 Billion Euros of Bonds, Beating Maximum Target

December 15, 2011

(Updates with bond yields in second paragraph.)

Dec. 15 (Bloomberg) -- Spain sold 6.03 billion euros ($7.8 billion) of debt, almost twice the maximum target for the auction, as the strong demand for the securities triggered a rally in the country’s bonds.

Spain auctioned bonds due in 2016 at an average yield of 4.023 percent, compared with 5.276 percent when securities of a similar maturity were offered on Dec. 1, the Treasury said. It priced bonds due in 2020 at 5.239 percent, compared with 5.006 percent in September, and sold an April 2021 bond, the current 10-year benchmark, at 5.545 percent, less than the 5.696 percent on the secondary market before the auction.

After the auction, Spanish bonds erased declines. The yield on the five-year benchmark fell 27 basis points to 4.69 percent with the 10-year yield declining 16 basis points to 5.53 percent, the lowest in more than a week. That narrowed the gap with German equivalents to 359 basis points from as high as 382 basis points before the sale.

The auction marked the second time in a week that Spain managed to sell more bonds than targeted, easing concern that the spread of the region’s debt crisis would make it harder to finance the country’s rising debt. Prime Minister-elect Mariano Rajoy pledged “important decisions” next week at his first Cabinet meeting to tame public finances and end the country’s three-year economic slump.

Demand for the 10-year bond was 2.16 the amount sold, compared with 1.76 in October, while investors offered 1.99 times the amount of the four-year bonds sold, compared with 2.83 on Dec. 1, and the bid-to-cover for the April 2020 notes was 1.52 compared with 2.01 times in September.

In a bid to convince investors they will deliver the region from its two-year debt crisis, euro-region leaders agreed on tighter budget rules and added 200 billion euros to their bailout fund after all-night talks in Brussels on Dec. 9. The fiscal accord also plans to start a 500 billion-euro rescue fund next year and dilutes a demand that bondholders shoulder losses in rescues amid concern that Italy and Spain may succumb to a debt crisis that’s brought Greece to the brink of bankruptcy.

--Editors: Andrew Davis, Eddie Buckle

To contact the reporters on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net; 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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