Tuesday 6 December 2016

Euro boosted as Spain gets away €3.5bn bond issue

Published 18/06/2010 | 05:00

Spain's Prime Minister Jose Luis Rodriguez Zapatero is grappling with a credit crunch as the money markets are reluctant to lend to the Iberian country weighed down with debt redemptions of €24.7bn in July
Spain's Prime Minister Jose Luis Rodriguez Zapatero is grappling with a credit crunch as the money markets are reluctant to lend to the Iberian country weighed down with debt redemptions of €24.7bn in July

A successful borrowing of €3.5bn by the Spanish government yesterday eased some of the concerns over eurozone government debt, and gave a boost to the single currency.

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The market rate on Spanish government bonds fell 0.11 percentage points after Spain sold €3bn of 10-year bonds at an average rate (yield) of 4.864pc -- less than the 5.04pc market rate before the bond auction. The euro rose to $1.2378 from $1.2311.

There was no immediate market relief for Ireland's bonds.

The yield on 10-year bonds was just ahead of that of Portugal, making it the eurozone's second most expensive debt again, after Greece's untradeable 9.34pc.

Portugal's short-term risks are seen as worse, with a 3.11pc yield on two-year bonds, versus 2.6pc for Ireland.

Spain, which faces debt redemptions of €24.7bn in July, is trying to convince investors it can cut the third-largest deficit in the euro region, while propping up the country's savings banks and lifting the economy out of a two-year slump.

"The strong demand for Spanish bonds should help restore confidence," said Ciaran O'Hagan, fixed income strategist at Societe Generale in Paris.

The good demand was only possible after a considerable rise in Spanish bond yields over the past few days, he said.

The extra interest investors demand to hold Spanish debt rather than equivalent German bonds narrowed to 2.06pc yesterday, after surging to 2.21pc on Wednesday -- the highest since before the euro was introduced, on speculation in the press that Spain would need to tap a European Union financial lifeline.

"A very strong set of results," Sean Maloney, a fixed income strategist at Nomura International in London, said. "A big yield concession in the lead-up, and news that Bank of Spain (central bank) is keen to publish stress test results on banks, probably shored up confidence."

Irish Independent

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