Spain raised €5.640 billion n an auction of short-term debt today, borrowing more money than first planned as it locked in sharply lower borrowing rates.
pain had originally planned to sell €3.5-4.5 billion in three- and six-month bills in the auction. Rates fell dramatically from the previous comparable auction last month, a sign of easing market tension, and European stock markets and the euro rose firmly in response to this and strong confidence data from Germany.
Investors have shown concerns this year over Spain's debt because of doubts over its ability to repay borrowers at a time of bulging deficits and an economic slump that has created a 21.5% jobless rate.
A new conservative government takes power on Thursday after winning a November 20 election by a landslide on promises to cut the deficit and boost jobs. In today's auction the borrowing rate on the three-month bills was down to 1.735% from 5.11% in the last sale. For the six-month bills, the rate fell to 2.435% from 5.227%.
Demand was very high, with investors bidding for €18.4 billion of bills in total, encouraging the Treasury to borrow more than the amount first planned - as it had also done in the two previous debt auctions.
Spain has promised to slash its public deficit from 9.3% of gross domestic product last year to 6% of GDP this year, 4.4% of GDP in 2012 and 3% of GDP - the European Union limit - in 2013.
In a speech yesterday ahead of his investiture, incoming prime minister Mariano Rajoy laid out his plans to create jobs, clean up banks and reassure investors that he can stabilise Spain's finances.
He said Spain would take measures to cut its deficit by €16.5 billion in 2012 but acknowledged that it may fail to meet the 6% deficit target this year.
Greece pays slightly higher rates in latest auction
Greece borrowed €1.3 billion for three months at a slightly increased interest rate of 4.68% in a bond auction today, the country's debt management agency said. At the last such auction on November 15 the interest rate was 4.63%.
The issue came against a backdrop of easing tension on euro zone bond markets after euro zone finance ministers agreed funding for the International Monetary Fund.
The latest sale of bonds attracted nearly three times as much demand as there was debt initially on offer. Demand totalled €2.910 billion for an initial offer of €1 billion worth of debt, the agency said.
The firming of the rate reflects uncertainty as Greece pursues negotiations with private creditors for a write-off worth about €100 billion of its debt of about €350 billion involving a loss of about 50% for the private creditors, mainly banks.
Greek bank talks "going well"
An official in Greece's coalition government has said negotiations with banks for a massive bond swap deal are "going well" and a framework agreement is expected in early January.
The official said it was likely that the outline of the deal would be settled early in January. Specific terms, including the participation rate of the banks involved, will be worked out later that month.
Banks and other private holders of Greek debt are negotiating a 50% write-down on the bonds. Their bonds will be replaced by new ones backed by a new European rescue fund.
The bond swap is a key part of second bail-out out deal for Greece agreed with euro zone countries.
