The average amount borrowed in November rose to 98 billion euros ($128 billion), the highest since September 2010, from 76 billion euros in October, according to data published by the Bank of Spain on its website today. It was the biggest monthly jump since June 2010 in absolute terms.
Spanish banks have struggled to raise funds from wholesale markets while competition to capture deposits from retail customers has increased, leading some to step up borrowing from the ECB. Caja de Ahorros del Mediterraneo, a lender that was seized by the Bank of Spain and then sold to Banco Sabadell SA (SAB) for one euro last week, has received 7.7 billion euros of ECB lending, Sabadell said on Dec. 8.
The data released today correspond to the month when Spain’s sovereign 10-year borrowing costs surged to a euro-era record of 6.78 percent. Since Nov. 17 that yield has dropped more than 1 percentage point, and was at 5.72 percent today. The extra yield investors demand to hold Spanish 10-year securities compared with their German counterparts was 370 basis points today, or 3.7 percentage points, little changed from 368 basis points yesterday.
The ECB started buying Spanish and Italian sovereign bonds in August and added to its liquidity measures for banks last week by offering lenders unlimited cash for three years. Banco Bilbao Vizcaya Argentaria SA (BBVA) Chairman Francisco Gonzalez had urged the ECB to offer loans of about three years last month in an opinion piece in Financial Times Deutschland. The new measures “should ensure access of the banking sector to liquidity,” ECB President Mario Draghi said on Dec. 8.
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