The Spanish Treasury has raised 3.98 billion euros in a debt auction for three and six-month bills, practically in line with its maximum issuance target of 4 billion euros. However, it was forced to offer higher yields than on the previous occasion.

€1.4bn of debt was offered in 3-month bills at a yield of 1.25% compared to 0.98% in the prior auction. The bid to cover ratio was 3.3, down from 3.4.

€2.58bn were offered in 6-month bills at a yield of 2.3% compared to 2.1% in the prior auction. The bid to cover ratio was 1.8, down from 2.1.

Market not too happy

The higher financing costs did not please the markets as investors expect pressure to return to Spain over a full bailout request.

Spain's risk premium rose to 420 basis points (4.2 percentage points) on Tuesday morning. The risk premium reflects the gap between the yield a government has to offer to entice lenders and the prevailing interest rate on the equivalent German government bond.

The Ibex35, Spain's main equity benchmark index, gave back some of its earlier gains following the auction. The Spanish 10-year bond yield moved up to 5.69%.

By 11:25, the Ibex35 was practically flat at 0.06%.



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