Monday 23 October 2017

Spanish borrowing costs decline as budget concern eases

Paul Tobin

Spanish and Irish borrowing costs declined at sales of government securities as concern eased the nations will struggle to contain their budget deficits.

Spain sold €5.5bn of 12 and 18-month bills at lower yields from previous auctions in July as demand rose, data from the country’s debt agency showed today.

Spain is also implementing austerity measures to pare its deficits, the third-largest in the euro region last year, according to European Commission figures from May.

The Spanish central government budget deficit narrowed to 2.83pc of gross domestic product in the first half from 3.76pc a year earlier, the Finance Ministry said July 28.

“There has been an improvement in market sentiment for peripheral countries over the last month and a half and that is leading to a tightening of spreads from the high levels hit in June,” said Giuseppe Maraffino, a fixed-income strategist at Barclays in London.

“Spain has taken several steps to improve its financial industry and that is helping the market. Today’s bills auction received very good demand.”

Spain sold €4.34bn of 12-month bills today at an average yield of 1.836pc, compared with 2.221pc on July 20, the debt agency said.

Demand was 2.47 times the amount sold, up from 1.95 last month. The government also auctioned €1.17bn of 18-month bills at 2.078pc, compared with 2.331pc last month. The bid-to-cover ratio was 3.86, up from 2.44 in July.


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