Spain had to pay more to raise €3.37 billion in a government bond auction this morning in a climate of heightened concern over euro zone debts.
Meanwhile, Portugal borrowed €1 billion for three and six months today but had to pay sharply increased interest rates even though demand was strong.
Spain has been caught up in renewed fears over debt levels, prompted by Portugal's requesting a bail-out earlier this month and a Standard & Poor's warning on Monday that it may downgrade US debt.
Higher yields are costly to Spain, whose central and regional governments and banks need to raise about €290 billion in 2011, according to Moody's.
In the latest issue, the treasury raised €2.49 billion in 10-year bonds at an average yield of 5.472%, up from the last similar auction on March 17 when the yield was 5.162%.
It also raised €885m in 13-year bonds at an average 5.667%, sharply up from the previous similar auction on November 19 2009 which paid a yield of 4.248%.
Spain faces significant refinancing hurdles in April, July and October. It has to roll over €21.8 billion of sovereign bonds and bills in April, €20.2 billion in July and €23.4 billion in October.
On Monday, the treasury was forced to pay sharply higher rates than a month earlier when it raised €4.66 billion in auctions of 12 and 18-month bills.
Spain, whose economy is the size of Greece, Ireland and Portugal's combined, has been battling to convince markets that it should not be lumped together with its less fortunate partners.
The Spanish authorities have enacted reforms to strengthen bank balance sheets, cut state spending, make it easier to hire and fire workers, lower the retirement age and sell off assets.
Prime Minister Jose Luis Rodriguez Zapatero has vowed to bring the country's annual public deficit below an EU ceiling of 3% of gross domestic product in 2013. The public deficit hit 11.1% of GDP in 2009 before falling to 9.24% last year. The economy is struggling with an unemployment rate that hit 20.3% - the highest in the industrialised world - at the end of 2010.
Portugal pays high rates to borrow €1 billion
Portugal, negotiating a debt rescue with the EU and IMF, borrowed €1 billion for three and six months today but had to pay sharply increased interest rates even though demand was strong.
Meanwhile, the yield or interest rate on existing Portuguese 10-year debt rose above 9% for the first time.
