Spain pays sharply lower yield on 10-year bonds

January 20th, 2012 - 12:09 pm ICT by IANS  

Madrid, Jan 20 (IANS/EFE) Spain’s Treasury sold benchmark 10-year bonds Thursday at a significantly lower yield compared to the previous auction, a sign of investor confidence in the country’s struggling economy.

Of the 6.6 billion euros ($8.5 billion) raised Thursday from the sale of debt with maturities ranging from four to 10 years, 1.3 billion euros ($1.68 billion) corresponded to the sale of four-year bonds at a yield of 4.05 percent, or slightly above the 3.95 percent paid in the previous issue of that note.

The Treasury also raised 5.3 billion euros ($6.87 billion) from its offerings of seven-year and 10-year bonds at yields of 4.64 percent and 5.47 percent, respectively, well below the 5.15 percent and 7.08 percent paid in the last such auction.

Not counting the marginally higher yield on the bond maturing in 2016, yields on Spanish debt have fallen in five consecutive auctions and in two auctions this week.

That despite last week’s move by ratings agency Standard & Poor’s to downgrade Spain’s debt by two notches and Moody’s forecast of a recession in Spain, Greece, Portugal and Italy.

Orders totaling 15.34 billion euros ($19.88 billion) were placed for Spain’s bonds, exceeding analysts’ expectations.

Investors showed particular interest in the longer-term debt, with 11.13 billion euros ($14.42 billion) worth of orders received in the offerings of seven-year and 10-year notes, more than twice the 5.31 billion euros ($6.88 billion) worth of debt sold.

Spain continues to inspire confidence in investors and sell its bonds with little trouble despite the worsening outlook for the refinancing of Greek debt.

After Thursday’s debt issue, the yield on Spanish 10-year bonds climbed on the secondary market from 5.15 percent to 5.22 percent, while the yield on 10-year German debt remained unchanged at 1.8 percent.

That put the country’s debt risk premium, the extra return on Spanish 10-year government bonds compared to equivalent safe-haven German debt, up slightly at 340 basis points, compared to 335 at the market opening.

Spain is scheduled to hold one more debt auction this month - of three-month and six-month paper - on Jan 24.


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