Spain pays more to raise fresh funds

18th May 2010, Comments 0 comments

The Spanish treasury sold 6.435 billion euros in bonds on Tuesday at a higher rate than the last issue as investors demanded a richer reward to lend money to Spain after recent debt scares.

The treasury issued 4.359 billion euros (5.4 billion dollars) in 12-month notes at a yield of 1.69 percent and 2.076 billion euros in 18-month notes yielding 2.05 percent, a spokesman said.

Investors submitted offers worth 5.499 billion euros for the 12-month issue and 2.776 billion euros for the 18-month note.

However, the treasury settled on issuing less than its overall target of 6.5 billion euros in order to keep the interest rate down, the spokesman said.

Despite the strong demand for the two issues, Spain had to offer sharply higher interest rates than just several weeks previously, with investors increasingly concerned about the country's public finances.

On April 23, Spain issued a 12-month note at a yield of 0.904 percent and a 18-month note at 1.18 percent.

The spokesman attributed the higher cost of borrowing to "market conditions."

Fears that Greece's debt crisis could engulf Spain and Portugal have hammered financial markets in recent months, pushing up Spanish and Portuguese borrowing costs and driving the euro to a four-year low.

After Spain's public deficit swelled to 11.2 percent of output last year, the Socialist government has committed to an austerity drive to slash the shortfall between its revenues and its spending to three percent in 2013.

© 2010 AFP

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