Spain One-Year Borrowing Costs Rise Before Rajoy Meets Draghi

Spain’s one-year borrowing costs rose in an auction today ahead of a meeting between Premier Mariano Rajoy and European Central Bank President Mario Draghi.

Spain sold 5.57 billion euros ($7.46 billion) of six- and 12-months securities, exceeding the Treasury’s upper goal of 5.5 billion euros. It sold six-month bills at an average 0.859 percent, down from 0.888 percent on Jan. 22. The 12-month securities yielded 1.548 percent, up from 1.472 percent on Jan. 15.

Demand for the six-month bills was 2.88 times the amount sold, compared with 3.85 last month, and the ratio was 1.97 compared with 2.21 on the longer-dated securities, the Madrid-based Bank of Spain said.

Spain’s borrowing costs rose last week for the first time since November. On Feb. 7, when the country last auctioned notes and bills, the yield on the 10-year benchmark bond jumped to 5.52 percent, the highest level since Jan. 11, when it dropped below 5 percent for the first time since March 2012.

Spain’s 2012 budget deficit will show unprecedented efforts of fiscal consolidation, Rajoy said earlier today during a news conference. Deficit data, which Rajoy says will be published in the coming weeks, will show how much he reduced the second-largest shortfall in the euro region after a year in office.

Spanish 10-year bond yields were unchanged at 5.35 percent after the auction at 10:55 a.m. in Madrid. That compares with a euro-era high of 7.75 percent in July, before Draghi pledged to safeguard the euro. Draghi will address lawmakers during a closed-door meeting at 2 p.m. in Madrid and hold a press conference at 3:30 p.m., before joining Rajoy at the Moncloa palace for bilateral talks.

The Treasury, which said on Feb. 7 it had sold 23 billion euros of notes and bonds, or 19 percent of its gross medium- and long-term issuance target for 2013, returns to the markets next week to sell three- and nine-month bills, and will issue bonds on Feb. 21.

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