Spain Sells $6.5 Billion of T-Bills, Exceeding Maximum Target at Auction

Spain sold 4.94 billion euros ($6.52 billion) of bills, more than the maximum target, and its borrowing costs fell.

The Madrid-based Treasury said it sold 12-month debt at an average yield of 4.050 percent, compared with 5.022 percent at an auction on Nov. 15. It sold 18-month paper at 4.226 percent, down from 5.159 percent last month.

Demand for the 12-month securities rose to 3.14 times the amount sold, compared with 2.13 last month, and the bid-to-cover for the longer-dated paper was 4.97 times compared with 5.96 previously. Spain aimed to auction as much as 4.25 billion euros. An official at the Treasury, who declined to be identified in line with government policy, said it sold more than the target because of the high volume of non-competitive demand, or bids that accept the rates that are determined by the auction. There was also an increase in demand from retail, or non-institutional investors.

“A positive set of Spanish auction results but providing only temporary relief given the ongoing systemic issues and related downgrade threat besetting the region,” Richard McGuire, a fixed income strategist at Rabobank in London, said in an e-mail. “These sales represent a temporary stay of execution.”

Pressure on Ratings

European Union leaders’ efforts to move towards a new fiscal accord at a summit on Dec. 9 lacks a “comprehensive solution,” increasing pressure on sovereign credit ratings, Fitch Ratings said yesterday. Meanwhile, Moody’s Investors Service plans to review all its European ratings. The yield on Spain’s 10-year benchmark bond rose yesterday above the 6 percent level that prompted the European Central Bank to start buying Spanish debt in August.

Spain’s shorter maturity bonds gained after the sale with the yield on benchmark two-year debt falling 14 basis points to 4.34 percent. The yield on the 10-year bond rose 8 basis points to 5.865 percent, widening the gap with German equivalents to 381 basis points, from 377 basis points yesterday.

Spain’s Parliament opened today after the pro-business People’s Party won a landslide victory in national elections on Nov. 20. Prime Minister-elect Mariano Rajoy pledged “important decisions” yesterday on austerity and measures to overhaul the economy when his Cabinet holds its first meeting on Dec. 23.

The Treasury aims to sell as much as 3.5 billion euros of bonds maturing in 2016, 2020 and 2021 on Dec. 15.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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