Spain has had to pay higher interest rates to auction off €4 billion in governments bonds as investors were unnerved by a sharp drop in global stock markets.

Spain's borrowing costs have been falling for months as investors gained confidence in the government's management of its finances and fears of a bailout receded.

The Treasury said it sold €1.2 billion in 15-year bonds today at an average interest rate of 4.54%, up from 4.34% on May 9.

It also sold €1.3 billion in five-year bonds at a rate of 3%, up from 2.79%, and €1.6 billion in three-year bonds at 2.44%, compared with 2.25% last time.

Asian and European slumped in trade today, with European stocks down over 2% and Tokyo shares dropping over 7%.