Spanish Treasury’s borrowing cost jumps

MADRID - Reuters

Spanish borrowing costs jumped at a bond auction yesterday, jolting wider European markets, as this week’s tough budget failed to calm investors’ nerves about the country’s finances.

Madrid sold 2.6 billion euros ($3.47 billion) of medium-term paper, at the low end of its target range, and two out of three of the yields rose slightly above analysts’ expectations.

“The Spanish Treasury failed to raise the maximum amount and yields, bid to cover ratios are lower than the previous auctions and all in all suggests investors remain very cautious towards Spanish bonds at the moment,” said Nick Stamenkovic, rate strategist at RIA Capital Markets.

The average yield on the 2015 bond was 2.890 percent, up from 2.440 percent from when it was last sold on March 15, 4.319 percent on the 2016 bond after 3.376 percent at the start of March, and 5.338 percent on the longer-dated bond. It was last sold on September when it had a yield of 5.156 percent.

European shares extended their losses after the auction and the cost of insuring Spanish and Italian debt against default rose. The Treasury sold 1.1 billion euros $1.47 billion) of a bond maturing in 2015, 973 million euros of a 2016 bond, and 489 million euros of a bonds with a 2020 maturity date.