Spanish borrowing costs climbed at an auction on Thursday as investor sentiment remained hurt by the corruption allegations against the premier and a weak economy.
While the Treasury raised more funds than targeted, the cost of borrowing rose across the board. The agency raised EUR 4.61 billion from the sale that included 3-year and 5-year benchmarks, against the EUR 3.5 billion - EUR 4.5 billion target.
The March 2015 bond fetched a yield of 2.823 percent, which was higher than the 2.476 percent paid at an auction on January 10. The bid-to-cover ratio rose to 2.21 from 2.07.
The yield on the bond due January 2018 increased to 4.123 percent from 3.770 percent in a sale on January 17. Demand was 2.24 times the offer compared to 2.32 times on January 17.
A long term bond due in January 2029 fetched a yield of 5.787 percent and saw a cover ratio of 2.02. The security was last auctioned in 2010.
Spanish Prime Minister Mariano Rajoy is facing calls to resign over allegations that he received illegal payments. The premier has denied his involvement.
Analysts fear such uncertainty on the political front could undermine investor confidence and stall the rally in Spanish and Italian bonds seen this year. The scandal pushed the Spanish 10-year yield higher this week.
Recent data showed that the economy is sinking deeper into recession and unemployment keeps on rising. According to the statistical office estimates, the economy contracted 0.7 percent in the fourth quarter amid harsh austerity measures by the government. The economy slipped into a recession in the first quarter of 2012 and the GDP has fallen steadily since then.
by RTT Staff Writer
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