Spain enjoys lower interest rates on new bond issue

7th April 2011, Comments 0 comments

Spain enjoyed slightly lower interest rates in a multi-billion-euro bond auction on Thursday, a sign that market fears of a eurozone debt crisis are easing despite the turmoil in Portugal.

The Treasury said it sold 4.129 billion euros ($5.891 billion) in three-year bonds at an average yield of 3.569 percent, down from 3.592 percent in the last comparable auction on March 3.

Demand was strong with offers of 7.4 billion euros, allowing the Treasury to sell an amount within its target range of 3.5 to 4.5 billion euros.

The auction attracted close attention from the markets following Wednesday's announcement by Portugal that it will seek financial assistance from the European Union to ease its debt woes.

"In general we think that contagion forces have weakened in the last couple of months and the market seems to have drawn a separating line between Spain and the three smaller peripherals" of Portugal, Greece and Ireland, Ioannis Sokos, a rates strategist at BNP Paribas in London, told Dow Jones Newswires.

Spain Thursday sought to distance itself from Portugal's request, insisting it was "not at risk" of seeking a similar bailout for its battered economy.

Concerns that eurozone debt troubles could spread to Spain pushed bond rates sharply higher last year, adding to the costs of servicing the country's sovereign debt.

Fears that Spain may be forced to seek a rescue by the European Union and IMF appear to have eased since then as Madrid strengthened bank balance sheets, cut spending and pursued economic reforms.

The Madrid stock market was up just 0.11 percent at 10,857.2 points by mid-morning on Thursday.

© 2011 AFP

0 Comments To This Article