Spain paid a higher borrowing rate in a key auction of 10-year bonds but managed to keep it below the psychologically important 6% level.
Overall, Spain's Treasury raised a higher-than-expected €2.541 billion in an issue of two- and 10-year bonds, a Bank of Spain statement said.
Investors had been nervously waiting for the result of the auction, fearing that a flop could unleash new attacks on Spain's sovereign debt, reigniting the euro zone debt crisis.
Spain paid a yield of 5.743% in the auction of benchmark 10-year government bonds, sharply up from 5.403% at the previous comparable auction January 19. But the rate was not as high as some had feared and demand for the long-term bond outstripped supply by more than two-to-one.
Analysts had predicted that a yield breaching 6% would spell serious trouble for the markets and for Spain's efforts to finance its sovereign debt.
As it was, the Treasury took advantage of the investor interest to raise more than the €1.5-2.5 billion originally targetted. Spain even managed to pay a lower rate in the auction of two-year bonds, for which the yield eased to 3.463% from 3.495% at the previous comparable issue on October 6, 2011.
The European Central Bank has helped to bring down yields on bonds of fragile euro zone nations by offering huge cheap loans to the region's banks, which in turn have snapped up sovereign bonds.
The ECB extended cheap, three-year loans of more than €1 trillion to euro zone banks in two operations in December and February to avert a dangerous credit squeeze.
Spain does not need bailout - IMF
Spain does not need a rescue loan from the International Monetary Fund, IMF chief Christine Lagarde said this evening as worries over the country's finances continued to spook investors.
"There is no such need at the moment as I understand," she told Bloomberg Television. She said Madrid was taking "really serious measures" on reforming the country's labour market and reducing its fiscal shortfalls.
"They are determined to take control of the provinces' budgets, which was an issue, and they have announced that they want to strengthen the Spanish bank capital."
She also said that the $1 trillion emergency "firewall" fund Europe is putting together is also a crucial tool to help prevent market contagion from undermining Spain and the euro zone.
"I hope that through the combined efforts that the Europeans will be able to support the efforts undertaken by the Spanish government."
The IMF has already joined the European Union in massive bail-outs of Greece, Portugal and Ireland, all much smaller economies than Spain's. If there is a need for a rescue programme, she said, "the IMF has to be there for all members - if there is appropriate burden sharing and proper risk mitigation."
