Spain paid lower rates to raise €5.7 billion in government bonds today, a major test in the midst of a deepening euro zone debt crisis.
The average yield for the 12-month bills was 3.335%, down from 3.702% at a similar auction on July 19, and demand outstripped supply two to one.
Demand for the 18-month bonds was three times the amount sold, and the yield was 3.592%, down from 3.912%.
The sale confirmed an easing of rates, helped by the intervention of the European Central Bank which said yesterday it bought a record €22 billion of government bonds last week in a bid to calm a euro zone debt crisis threatening Italy and Spain.
The Spanish Treasury announced early this month it would not hold a bond auction previously scheduled for August 18. Euro zone woes and weak US data have sparked concern that the world could be heading for another sharp downturn.
On August 5, the debt risk premium for Spain and Italy reached a record gap with the benchmark German bond. But the spread, or difference in the rate of return with German bonds, has since eased. The yields on Spanish and Italian 10-year bonds fell to below 5% this afternoon, with traders reporting that the ECB was continuing to buy bonds.
Euro zone debt fears were heightened after preliminary data today showed that growth in Spain's battered economy slowed in the second quarter of 2011.
