Interest rates rise in Spanish bond sale

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Spain had to pay higher interest rates to raise 3.876 billion euros via a bond sale Tuesday as investors remained nervous about whether the country may need a debt rescue like Greece and Ireland.

The treasury sold 3.0 billion euros (3.9 billion dollars) of three-month bills at an average yield of 1.804 percent, compared with 1.743 percent when the securities were last sold on November 23, the economy ministry said.

It also sold 876 million euros of six-month bills at 2.597 percent compared with 2.111 last month.

The Spanish government had expected to sell between 3.0 and 4.0 billion euros through the bond sale, the last one of this year.

Spain has faced higher borrowing costs since Ireland last month agreed to a bailout from the International Monetary Fund and the European Union similar to the one granted Greece in May.

A rescue for Spain would be far bigger than anything seen to date in Europe: the size of its economy is twice that of Greece, Ireland and Portugal combined.

Last week Moody's rating agency, which trimmed Spain's sovereign debt rating from top-notch Aaa to Aa1 in September, said it had now put it on review for a further cut.

The New York-based agency said Tuesday it had downgraded its credit rating for two of Spain's 17 regional governments, Castille-La Manche and Murcia.

The Spanish government aims to slash its public deficit from 11.1 percent of GDP last year, the third highest in the eurozone after Greece and Ireland, to 3.0 percent -- the European Union limit -- by 2013.

© 2010 AFP

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