Spain Debt Auction Concerns Unsettle Markets

Spain has continued
to pay record high rates for short-term bills and is expected to do so
again at a sale of longer-term bonds on 21 June. The news limited gains
brought about by the Greek election result on stock markets, as investors fear
that the Spanish government will soon need international help.

On 18 June Spanish
10-year bond yields hit a record high above the 7% level, which has previously been
the trigger for sovereign bailouts of Greece, Ireland and Portugal.

Spain’s Treasury was
due to issue between €2bn and €3bn of 12- and 18-month debt. In the event
it issued a total of €3bn bills, at the top end of its target. The yield for
the longer-dated paper was the highest since November when election uncertainty
in Spain and global market jitters pushed yields on the same bill to 14-year

The Treasury sold €2.4bn
of the 12-month T-bill at an average yield of 5.074%, compared with 2.985% at
the last auction for debt of this maturity in May.

The sale scheduled
for Thursday is of between €1bn and €2bn of bonds due in 2014, 2015 and 2017.


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