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Spanish Five-Year Bonds Yield Record Low at Debt Auction

Jan. 9 (Bloomberg) -- Spain sold five-year debt at the lowest yield on record, as foreign investors bet on the nation’s recovery.

The Treasury sold a new five-year bond to yield an average 2.382 percent, the lowest at a five-year auction since Bloomberg started compiling the data in 2005. The stop-out yield on the five-year bond was 2.411 percent, the lowest at an auction since 1993, according to Treasury records.

It also sold its benchmark 15-year bond at an average 4.192 percent, compared with 4.809 percent in September and 4.249 percent on the secondary market. Demand at the auction, at which the Treasury raised 5.29 billion euros ($7.2 billion), was 2.1 times the amount sold.

Spanish borrowing costs have fallen from the highs of the sovereign debt crisis as foreign investors buy bonds and stocks amid improving growth prospects and record-low interest rates in Europe. While non-residents’ holdings of bonds are the highest since 2011, investors including billionaires George Soros and Bill Gates have bought stakes in Spanish companies and private equity firms are moving into the nation’s finance industry.

Spain’s current benchmark five-year bond yield fell an all-time low of 2.244 percent after the first bond auction of the year, compared with 2.326 percent yesterday and a high of 7.592 percent in July 2012.

Spain said yesterday it may issue 30-year bonds and securities linked to European inflation this year, when it plans to issue 65 billion euros of net debt. All of the net issuance will come from medium- and long-term instruments as the Treasury seeks to lengthen the average maturity of its debt, after the fiscal crisis forced it to concentrate on shorter-dated securities.

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

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net

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