Monday 18 December 2017

Spain cancels debt auction following an offload of €3.31bn bonds

bond market

Donal O'Donovan

THE Spanish government succeeded in selling €3.31bn of debt yesterday but had to pay higher interest to place the bonds with investors. Hours after the deal closed, the country cancelled a debt auction due on August 18.

Despite ruling out a second bond sale this month, Spain said it did intend to raise debt in the markets on September 1. Postponing or cancelling individual auctions is relatively common -- Italy and France have both opted to cancel sales this month.

Spain went ahead with yesterday's debt sale despite volatile markets that pushed the yield, or interest charged, for its key 10-year bonds toward a record 7pc amid fears it could be heading for a bailout.

The country paid 4.813pc interest to borrow €2.2bn of three-year bonds, up from 4.291pc interest for similar bonds sold on July 7. It paid 4.984pc to borrow €1.1bn over four years. It means the country is paying more than the 4pc Ireland and Greece are paying under the new bailout deal agreed last month.

"The auction went better than expected," said Cagdas Aksu, a fixed-income analyst at Barclays Capital in London. "The volumes sold are very reasonable."

Demand for the three-year bonds was 2.14 times the amount sold, compared with 2.29 times in July.

The Spanish benchmark bond's yield is up nearly three-quarters of a per cent since the European leaders' summit on July 21 that failed to convince investors the debt crisis was under control. (Additional reporting, Bloomberg)

Irish Independent

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