The Spanish Treasury sold €2.4 billion euros, or $3 billion, of 12-month bills at a yield, or interest rate, of 5.074 percent. compared with 2.985 percent at a similar auction last month. It also sold 640 million euros of 18-month debt with a yield of 5.107, compared with 3.302 percent last month. Madrid is also hoping to sell up to 2 billion euros in longer-term bonds on Thursday.
Christel Aranda-Hassel, senior European economist at Credit Suisse in London, said that, while at this stage Spain was still able to sell bonds to cover its financing needs, the price was “brutal.”
“The market is very uncertain that the euro will survive and, if that is the case, you don’t touch this debt with a barge pole,” she said. “You need to break this fear that the euro is on the verge of breakup.”
The government in Madrid has some flexibility in the amount of debt it needs to sell now, as it has already covered about three-fifths of its borrowing needs for the full year through previous sales. Spain’s Treasury accelerated its scheduled bond sales in the first quarter in order to take advantage of long-term loans provided by the European Central Bank to banks that bought hefty amounts of domestic debt.
But the yield on Spanish 10-year bonds, considered the benchmark for borrowing costs, was at 7 percent early Tuesday afternoon. On Monday, the yield rose as high as 7.2 percent on Monday, a record since the inception of the euro and a level seen as many — including the country’s economy minister, Luis de Guindos — as unsustainable in the long term.
AS A WISE MAN ONCE SAID: "SOMETHING THAT CAN'T GO ON FOREVER, WON'T."
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