Spain has sold €4.5 billion in a medium and long-term bond sale that saw interest rates dropping as market fears ease over whether the country will need outside help to manage its finances.

The Treasury sold €2.41 billion in three-year bonds at an average interest rate of 2.71%, down from 3.35% in the last such auction December 13.

It also moved €1.58 billion in five-year bonds at 3.77%, compared with 3.98% earlier this month and placed €512m in bonds maturing in 2041 with a yield of 5.69%.

Spain's borrowing costs have dropped from unsustainable highs last year after the European Central Bank offered to help countries struggling with their debts.