Spanish bonds gained after the Treasury met its target at a debt sale, while French costs declined at an auction, easing concern that the countries will struggle to finance their borrowings.
The Spanish Treasury sold EUR2.52 billion (US$3.31 billion) of bonds, exceeding its maximum target. Still, Spain had to pay 4.037 per cent to sell debt for three years, up from 2.617 per cent at a March 1 sale.
The auction was the first long-term debt sale since Standard & Poor’s lowered the nation’s credit rating last week, leaving Spain three notches from junk status. The effect of the European Central Bank’s EUR1-trillion three-year refinancing operation is also fading, leaving a clearer indication of demand.
“This is a proper, good, honest market now,” Peter Chatwell, a bond analyst at Credit Agricole SA in London, said. “Expectations of big, blow-out auctions need to disappear. The yields are all sub-5 per cent, that’s a comfortable level.”
The yield on Spain’s existing five-year benchmark declined 7 basis points to 4.7 per cent at 12 pm in Madrid, and the yield on the benchmark 10-year bond fell 3 basis points to 5.82 per cent. Spain also sold two five-year bonds at 4.752 per cent and 4.96 per cent.
France held its final auction before the nation chooses its next president in a final round of voting on May 6. The Treasury sold EUR3.32 billion of 10-year bonds at an average yield of 2.96 per cent, down from 2.98 per cent on April 5, as part of an auction of EUR7.43 billion of government debt. France’s 10-year bond yield fell to 2.92 per cent after the sale.