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Spain passes loan test with bond sale

Source: AFP - Wed 20th Oct 2010

Spain raised more than ¤6bn in bond auctions yesterday at lower interest rates than previously in a sign that investor concerns over its ability to slash its public deficit are easing.

Spain’s treasury said it raised ¤4.18bn ($5.82bn) in 12-month bonds at an average yield — or return — of 1.842 percent, down from 1.908 percent at the previous auction on September 21.

It sold another ¤2.216bn in 18-month bonds at 2.009 percent, down from 2.146 percent in the last auction.

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The Treasury received total bids of EU13.099bn, and the amount sold was within its targeted range of EU6bn to EU7bn. Spain raised more than EU6bn in bond auctions yesterday at lower interest rates than previously in a sign that investor concerns over its ability to slash its public deficit are easing.

Spain’s treasury said it raised EU4.18bn ($5.82bn) in 12-month bonds at an average yield — or return — of 1.842 percent, down from 1.908 percent at the previous auction on September 21.

It sold another EU2.216bn in 18-month bonds at 2.009 percent, down from 2.146 percent in the last auction.

The Treasury received total bids of EU13.099bn, and the amount sold was within its targeted range of EU6 to EU7bn.

Analysts quoted by Dow Jones Newswires said the good performance was helped by a deals reached in the past few days between the ruling Socialist Party of Prime Minister Jose Luis Rodriguez and small regional parties that assure the passage of his minority government’s crucial 2011 austerity budget. “The auction had good demand and pricing from the issuer’s perspective,” said Giuseppe Maraffino, strategist at Barclays Capital in London. “The improvement in market sentiment in the last few weeks has been a supportive factor.”

Spain is among several eurozone countries, including Ireland, Greece and Portugal, which are grappling with substantial public deficits that have raised fears for their solvency.

But market concerns have gradually eased since the government earlier this year announced the sharpest spending cuts since Spain returned to democracy following the death of dictator Francisco Franco in 1975. The cuts aim to bring the public deficit, which peaked at 11.2 percent last year, down to 6.0 percent of GDP in 2011 and to the eurozone limit of three percent in 2013 with measures including cuts to civil servants’ wages, a sales tax increase and a freeze on pensions.

Analysts quoted by Dow Jones Newswires said the good performance was helped by a deals reached in the past few days between the ruling Socialist Party of Prime Minister Jose Luis Rodriguez and small regional parties that assure the passage of his minority government’s crucial 2011 austerity budget. “The auction had good demand and pricing from the issuer’s perspective,” said Giuseppe Maraffino, strategist at Barclays Capital in London. “The improvement in market sentiment in the last few weeks has been a supportive factor.”

Spain is among several eurozone countries, including Ireland, Greece and Portugal, which are grappling with substantial public deficits that have raised fears for their solvency.

But market concerns have gradually eased since the government earlier this year announced the sharpest spending cuts since Spain returned to democracy following the death of dictator Francisco Franco in 1975. The cuts aim to bring the public deficit, which peaked at 11.2 percent last year, down to 6.0 percent of GDP in 2011 and to the eurozone limit of three percent in 2013 with measures including cuts to civil servants’ wages, a sales tax increase and a freeze on pensions.