Spain raised 2.59 billion euros ($3.41 billion) in bonds on Wednesday but was forced to pay higher rates amid fresh concerns over its strained public finances despite a tough budget.
The sale was an important test for Spain, being its first bond issue since the government presented a 2012 budget on Friday which contained tough austerity measures worth 27 billion euros.
After easing earlier this year, pressure on Spain has mounted in recent weeks as the government struggles to stabilise the public finances, prompting fresh concerns that the eurozone debt crisis could yet claim another victim after Greece, Ireland and Portugal.
The Spanish treasury paid 2.89 percent on the 3-year bonds, compared to 2.440 percent on March 15; 4.319 percent on 4-year bonsd, up from 3.376 percent on March 1 and 5.338 percent on 8-year bonds, up from 5.156 percent on September 15.
Bids from investors totalled some 6.5 billion euros but the amount raised was at the lower end of the 2.5-3.5 billion euros range the treasury had hoped for.
In Portugal meanwhile, the treasury raised 1.5 billion euros in six and 18-month paper, the first time it has offered debt of longer than one year maturity since being bailed out in May last year.
The Portuguese debt agency raised one billion euros in 18-month bonds at 4.537 percent, attracting bids equal to 2.6 times the amount offered.
It also raised 500 million euros in 6-month debt at 2.900 percent, down sharply from the 4.332 percent paid at the last similar sale on February 15.
The debt agency had aimed to raise 1.25-1.50 billion euros and plans to raise another 2.5-3.0 billion euros in 6- and 12-month debt by the end of the second quarter.
“It is not a bad outcome but it could have been better,” said Filipe Silva, bond strategist at Banco Carregosa.
“I was expecting a much larger fall in rates,” Silva said, adding: “The “real test will come when Portugal wants to sell long-term debt.”
The European Union and International Monetary Fund bailed Portugal out in May 2011 with a package worth 78 billion euros in return for the government adopting a series of draconian economic reforms and spending cuts.