Spain pays record interest rates in 10-year bond issue

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Spain's treasury had to pay a record interest rate of 6.975 percent for a new debt issue when it raised 3.563 billion euros ($4.808 billion) with 10-year bonds on Thursday.

The interest rate paid was the highest since the creation of the euro single currency, according to Dow Jones Newswires, and it was much higher than the rate of 5.433 percent paid at the last similar auction on October 20.

The rate is also near the 7.0-percent threshold above which funding costs are deemed unsustainable and Greece, Ireland and Portugal quickly sought international aid once their bond yields rose that far.

The government had hoped to raise between three and four billion euros with the bond sale. Demand totaled 5.503 billion euros.

The bond sale comes as the gap in borrowing rates on German government bonds and those of Spain hit the highest level since the creation of the euro amid acute strains over eurozone debt.

The spread between yields on existing traded Spanish 10-year bonds and the German bund hit 489.5 basis points, or 6.649 percent, another record, just before the bond sale, suggesting investors are getting increasingly nervous about Spain's ability to get a handle on its debts.

© 2011 AFP

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