Spain's borrowing costs climbed again at a debt auction on Thursday despite rising demand, as the government is set to release crucial bank stress test results later and, thereafter, make a formal request for financial aid to the Eurogroup.
The Spanish Treasury raised a total EUR 2.2 billion from the sale of its 2-, 3- and 5-year bonds. The proceeds slightly exceeded the maximum target of EUR 2 billion set for the auction.
The country placed EUR 700 million of its 3.40 percent April 2014 bond to yield 4.706 percent, more than double the 2.069 percent paid in the previous sale on March 1. The bid-to-cover ratio, which reflects demand, rose to 3.97 from 2.81.
The agency also sold EUR 918 million 4 percent July 2015 debt at 5.457 percent, up from 4.876 in the previous sale on May 17. Demand for the 3-year debt was 3.18 times the offer, which was more than the 3.01 times in May.
Further, Spain raised EUR 602 million by selling its 5.50 percent July 2017 bond at a euro-era high yield of 6.072 percent, higher than the 4.960 percent paid at a May 3 auction. Investors bid 3.44 times the offer, up from 3.14 times in the previous sale.
The embattled country is widely expected to make a formal request for up to EUR 100 billion aid for its banking system at a Eurogroup meeting in Luxembourg later in the day. The request was approved by Eurozone ministers last week.
Ahead of that, the government is set to publish the results of the stress tests of the country's banks. The report is expected to shed more light on the dire situation in the banking system, and analysts expect the recapitalization figure to come in between EUR 60 billion and 70 billion.
The Eurozone approval for Spain's bank bailout failed to calm investors' concerns over the prospects of the economy, and the country's borrowings costs have been rising ever since. The benchmark 10-year yield hit a euro-era high of 7.30 percent on Tuesday. Greece and Portugal were forced to seek bailouts after they faced borrowing costs above 7 percent.
Positive news out of Greece also have not helped boost investor confidence on Spain. Yesterday, Greek political leaders agreed on a three-way coalition and the Head of the New Democratic Party Antonis Samaras was sworn in as the new prime minister.
Amid rising worries that Spain may lose access to the financial market, clearing house LCH Clearnet raised the margin for trading in the country's bonds on Tuesday. The margin is the extra amount that clients must keep in their account. The margin charged on 10-15 year Spanish debt was hiked to 14.7 percent from 13.6 per cent.
by RTT Staff Writer
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