Spain's short-term debt auction on Tuesday raised more funds than targeted at lower costs as the nation urges the European Union to relax its deficit targets.
The treasury sold altogether EUR 5.1 billion of treasury bills, exceeding the EUR 4 billion-EUR 5 billion target set for the auction. It included EUR 1.2 billion of 6-month bills and EUR 3.9 billion 12-month paper.
The 6-month bill was sold at 0.53 percent yield compared to 0.794 percent at the previous auction on March 12. Similarly, the cost of borrowing of 12-month bills fell to 1.235 percent from 1.363 percent.
The demand for 6-month T-bills exceeded the offer by 3.77 times compared to 3.22 at the prior auction. Likewise, the bid-to-cover ratio of 12-month paper increased to 2.04 from 1.85.
The government plans to raise between EUR 3.5 billion and EUR 4.5 billion from bond sale on Thursday.
Spain's government has requested the European Union to relax its deficit target for 2013 to 6 percent of gross domestic product compared to the previous goal of 4.5 percent.
Despite severe recession and little scope for recovery in 2013 and a record high unemployment, Spanish debt issues have been successful so far this year due to ample liquidity. In addition, the European Central Bank's pledge to purchase securities of troubled member nations revived investor confidence.
The Bank of Spain expects the economy to recover next year and it forecast the unemployment rate to rise to 27.1 percent, before easing over the course of 2014 to 26.8 percent.
Due to higher requirements for funds at federal and autonomous levels, public debt hit a record 84.1 percent of gross domestic product in 2012, which is well above the European Union's ceiling of 60 percent.
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