Yields Decline as Spain Sells 3- and 5-Year Debt

Spain experienced a reduction in borrowing costs during an auction of three- and five-year government debt, fueled by optimism surrounding a potential aid package for Greece.

On Thursday, Spain’s Treasury successfully sold €1.712 billion in three-year government bonds, achieving an average yield of 3.617%, a decrease from 3.66% seen in a comparable auction the previous month. However, demand was lower than in the prior auction, with the bid-to-cover ratio falling to 2.1 from 2.83 in October, indicating that bids exceeded supply by a lesser margin.

The Treasury also sold €645 million in five-year government bonds, achieving an average yield of 4.477%, down from 4.68% in the earlier auction.

In addition, €1.523 billion of debt maturing in 2021 was auctioned at an average yield of 5.517%. Overall, Spain’s treasury raised a total of €3.88 billion, exceeding its target of €3.5 billion.

Following the auction, the yield on Spanish 10-year bonds was recorded at 5.64%.

On the currency front, the euro strengthened against the U.S. dollar, trading 0.14% higher at 1.2847.

European stock markets responded positively to the auction results. Spain’s IBEX 35 Index increased by 0.75%, the EURO STOXX 50 rose by 0.5%, France’s CAC 40 gained 0.4%, Germany’s DAX advanced by 0.75%, while London’s FTSE 100 saw a modest increase of 0.4%.