Spain has come through a critical test to borrow money by offering high interest rates, but analysts said strong demand may reassure markets alarmed about the nation's finances.
The sale of government debt bonds was seen as critical test for the country, hit this week by rumours it needs huge rescue funds from the European Union.
The sale also occurred on the day EU leaders meet in Brussels on the European debt crisis, and the day before talks here involving the head of the International Monetary Fund, Dominique Strauss-Kahn.
The treasury issued €3 billion euros in 10-year bonds and €479m of 30-year bonds, to raise a total of €3.479 billion, at the top end of its expectations of €2.5 billion to €3.5 billion.
Investors submitted bids worth €6.83 billion worth of bids for the bonds.
But despite the strong demand for the two issues, Spain had to offer higher interest rates than at the last similar auctions on May 20 and March 18, with investors increasingly concerned about the country's public finances.
The maximum yield for 10-year bonds was 4.911%, up from 4.074%, and 5.937% for 30-year bonds, compared to 4.768% previously.
Market sentiment has been affected by various rumours concerning possible strains within the Spanish banking system and reports that Spain might need help amounting to €200-250 billion from the European Union.
EU and Spanish officials have strongly denied the reports.
After Spain's public deficit swelled to 11.2% of output last year, the Socialist government has committed to an austerity drive to slash the shortfall between its revenues and its spending to 3% in 2013.
Elsewhere, the International Monetary Fund have said they are 'very impressed' by Spanish measures to end the country's fiscal crisis.
'We are very impressed by the deficit targets they have announced that seem fully appropriate,' said IMF spokeswoman Caroline Atkinson.
Her comments came after Spain bit the bullet and approved crucial reforms of its rigid job market yesterday.
