Doubts over eurozone debt push up Spanish bond rates

Friday, 19 November 2010 02:17 - - {{hitsCtrl.values.hits}}

MADRID (AFP) - Spain raised 3.654 billion euros in 10-year and 31-year bonds on Thursday but had to offer higher yields as investors sought greater returns due to renewed concerns over eurozone debt levels.

The Spanish treasury had sought to sell between 3.0 and 4.0 billion euros (4.08 to 5.44 billion dollars) of the bonds.

It saw strong demand for the 10-year bonds, receiving offers totaling 4.7 billion euros and raising 2.6 billion.

But the average yield was 4.615 percent, up from 4.144 percent at the last auction on September 16.

For the 31-year series, the treasury raised 1.1 billion euros, exactly half the amount of the bids received, and at a yield of 5.488 percent compared to 5.077 percent in the September sale.

The Spanish treasury also had to offer sharply higher yields in an auction of its 12-month and 18-month bonds on Tuesday.

The increased rates reflected renewed concern over eurozone debt levels.

Ireland faces financial crisis talks with a delegation from the European Commission, the European Central Bank and the International Monetary Fund on Thursday, as markets await news of a bailout.

Investors fear possible contagion from the situation in Ireland to other weak eurozone nations such as Portugal and Spain.

In a bid to ease the concerns, Finance Minister Elena Salgado said Tuesday there is “no reason” to compare Spain with the debt-struck economies of Ireland and Portugal.

“The situation in Spain is and will continue to be completely different,” she said. “We have adopted (austerity) measures in May and we are applying them.”In a bid to shore up its public finances, the government in May passed a 15-billion-euro (20.5-billion-dollar) austerity package that included an average state employee salary reduction of five percent and a pensions freeze.

That was on top of a 50-billion-euro package of spending cuts announced in January designed to slash the public deficit to the eurozone limit of three percent of gross domestic product by 2013 from 11.1 percent last year.

Spain’s timid economic recovery from nearly two years of recession triggered by the collapse of a property bubble came to a stop in the third quarter amid tough austerity measures, official data showed Wednesday.

Gross domestic product showed zero growth in the three months to September 30 from the previous quarter, the national statistics institute said.