Spain pays sharply higher rates to borrow 3.48 bn euros

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Spain paid sharply higher borrowing rates in a 3.48-billion-euro ($4.83-billion) bond issue Tuesday compared to a similar sale in late September, the Bank of Spain said.

In the sale, rates on three-month bonds increased to 2.292 percent from 1.692 percent previously and to 3.302 percent from 2.665 percent for six-month bonds in a market still very much affected by the eurozone debt crisis.

Higher rates mean Spain must pay more to convince investors to lend it money, indicating weakening confidence in its ability to pay its debts. Demand for the bonds was high however, with bids for 9.6 billions euros' worth.

Rates had also risen in the last sale on September 27.

Spain has promised to reduce its annual public deficit from the equivalent of 9.3 percent of gross domestic product last year to 6.0 percent of GDP this year, 4.4 percent in 2012 and 3.0 percent in 2013.

But economists and credit raters have cast doubt on these targets because of slower-than-expected economic growth.

The major credit rating agencies Moody's, Fitch and Standard & Poor's each cut Spain's rating this month.

Markets were watching anxiously for signs that European leaders, due to meet for their latest crisis talks on Wednesday, would find a solution to a debt crisis that is threatening the stability of the eurozone.

The Madrid stock market fell by 0.13 percent in morning trade on Tuesday.

© 2011 AFP

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