Spain Survives Debt Auction but Pays Hefty Price
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Spain raised €3.39 billion ($4.28B) when it auctioned 12 and 18 months bills today. The upper target was €3 billion, so demand was strong, but yields were sharply higher than previous auctions. On 12-month debt, yields hit 5.07 percent, and on 18-month bills, the yields were 5.10 percent. Yields on 10-year notes are trading above 7 percent in the secondary market but they are off highs seen yesterday. On Thursday, Spain will be tested again when it auctions longer maturity treasures.
Spain's ability to sell its debt is key issue in Europe, and Spanish debt auctions are widely view as proxy for EU stability. Yields on Spanish debt are already very high, and if they continue rising, it would make borrowing unsustainable, forcin them to turn to other EU countries who may or may not be there to lend them the capital needed to run the government.
"We in the government are convinced that the current situation of punishment in the markets, what we're suffering from today, doesn't correspond with the efforts, or the potential, of the Spanish economy," Luis de Guindos, Spain's Minister of Economy said Monday. "This is something that will have to be recognized in the coming days and weeks."
On Thursday, two independent audits of Spain's banks are due out and they are expected to tap a portion of the €100 billion euro zone rescue loan to patch the losses. How much they will need remains to be seen.
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Spain's ability to sell its debt is key issue in Europe, and Spanish debt auctions are widely view as proxy for EU stability. Yields on Spanish debt are already very high, and if they continue rising, it would make borrowing unsustainable, forcin them to turn to other EU countries who may or may not be there to lend them the capital needed to run the government.
"We in the government are convinced that the current situation of punishment in the markets, what we're suffering from today, doesn't correspond with the efforts, or the potential, of the Spanish economy," Luis de Guindos, Spain's Minister of Economy said Monday. "This is something that will have to be recognized in the coming days and weeks."
On Thursday, two independent audits of Spain's banks are due out and they are expected to tap a portion of the €100 billion euro zone rescue loan to patch the losses. How much they will need remains to be seen.
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