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Spain raises 4 bln euros in syndicated bond issue

Spain raised four billion euros ($5.6 billion) Tuesday in a sale of 15-year bonds through a syndicate of banks, according to market and official sources.

Investors showed solid demand for the 15-year government bonds, which paid out an annual interest rate, or yield, that was higher than the equivalent market rate, a market source said.

Spain’s central and regional governments and its banks need to raise a combined 290 billion euros in gross debt including rollovers in 2011, according to Moody’s Investors Service.

Fears that eurozone debt troubles could spread to Spain pushed bond rates sharply higher last year, adding to the costs of servicing the sovereign debt, but they have steadied since.

Traders submitted requests for seven billion euros of the latest bonds, the market source said, and the yield equalled about 5.986 percent, higher than the market rate Tuesday afternoon of 5.873 percent.

At the last 15-year bond auction on December 16, the yield was 5.953 percent.

Most of Spain’s government bonds are sold by auction. But every year a proportion is also sold through a group of banks, which underwrite the bonds and sell them on to investors at a profit.

A Treasury spokesman confirmed the latest 15-year syndicated bond issue had been launched but declined to give details.

Spain’s government has enacted a series of reforms to ease market fears about its high annual deficits and the sluggish economy, encumbered by an unemployment rate of more than 20 percent at the end of 2010.

Madrid has raised sales taxes, frozen old age pensions, cut public workers’ wages by five percent, forced banks to strengthen their balance sheets, raised the retirement age and made it easier for firms to hire and fire.

The government said last week it had trimmed the public deficit to 9.24 percent of total economic output in 2010 from 11.1 percent in 2009, narrowly beating its target of 9.3 percent.

Madrid has vowed to drive its public deficit below the European Union limit of 3.0 percent of gross domestic product by 2013.