Bloomberg News

Spain Meets Maximum Target at Bills Sale as Borrowing Costs Fall

April 23, 2013

Spain met its upper goal at a bills sale today and borrowing costs fell even as the government struggles to cut the European Union’s largest budget deficit.

The Treasury sold 3.01 billion euros ($3.91 billion) of bills, compared with an upper target of 3 billion euros. It sold three-month bills at an average 0.12 percent today, down from 0.285 percent on March 19. It sold nine-month debt at 0.787 percent, compared with 1.007 percent at the previous auction.

The Spanish economy, the euro-area’s fourth largest, contracted 0.5 percent in the first quarter after shrinking 0.8 percent in the final three months of 2012, the Bank of Spain said today. Prime Minister Mariano Rajoy is due to unveil measures to stimulate growth later this week after a bank bailout propelled Spain’s deficit last year to the largest in the region.

Demand for three-month debt was 3.76 times the amount sold, up from 3.30 last month. The ratio fell to 2.37 from 2.45 on the longer-dated securities, the Madrid-based central bank said.

The yield on Spain’s 10-year benchmark bond fell 8 basis points to 4.41 percent at 10:48 a.m. in Madrid, leaving the spread with similar German maturities at 3.21 percentage points. That compares with a euro-era record of 7.75 percent on July 25, before European Central Bank President Mario Draghi offered to buy the bonds of euro nations that sign up to a rescue from the euro-area’s bailout fund.

Spain’s Treasury last week said it has covered 43 percent of its planned mid- and long-term gross funding needs for 2013 after selling 10-year bonds at the lowest yield since 2010. It is due to return to the markets to sell bonds on May 9.

To contact the reporters on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net; Ben Sills in Madrid at bsills@bloomberg.net

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


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