Spain Sells Bonds at Record-Low Yield as Rajoy Touts ReboundBen Sills
Spain auctioned three-year notes at the lowest yield on record as bonds from Europe’s most-indebted nations rallied and the government upgraded its assessment of the Iberian country’s economy.
The Treasury sold notes maturing in April 2017 at an average yield of 1.595 percent, the lowest at a three-year auction since Bloomberg started compiling the data in 2004. The sale, which also included debt due in 2026 and 2028, raised 5.91 billion euros ($8 billion), the largest amount for an auction of bonds in a single day since January 2012.
Securities from the euro region’s periphery are surging as their economies recover from the debt crisis that sparked a recession and pushed borrowing costs to euro-era records. Spain’s expansion probably accelerated in the fourth quarter of last year, Prime Minister Mariano Rajoy said this week.
“Getting cheaper funding is important in making debt sustainable,” said Ciaran O’Hagan, head of European rates strategy at Societe Generale SA in Paris. “If interest rates fall Spain gets cheaper and cheaper levels at each auction and that does help to restore confidence in the longer-term outlook,” he said.
Spain auctioned the 2026 bonds at an average yield of 3.98 percent. It sold the 2028 securities at a yield of 4.20 percent, little changed from the previous offering last week. The amount raised exceeded its 5.5 billion-euro maximum target.
The nation’s 10-year yield fell two basis points, or 0.02 percentage point, to 3.74 percent at 11:36 a.m. London time. It reached 3.67 percent on Jan. 9, the least since 2006.
Spain’s increased competitiveness “is the root of a solid and sustainable economic growth in the future,” Rajoy told members of the U.S. Chamber of Commerce in Washington. “It’s the axis of a vigorous, healthy and long-lasting economy.”
Ireland raised 3.75 billion euros selling 10-year bonds via banks last week, returning to financial markets after completing a three-year bailout program. Portugal is planning to resume auctions of bonds in the first half of this year and Greece, which sold bills this week at the lowest rate in more than three years, has said it may sell five-year notes in the second half.
BlackRock Inc., which had $4.1 trillion of assets under management as of Sept. 30, bought Irish and Portuguese bonds at sales last week, Michael Krautzberger, head of European fixed income at the firm, said two days ago.
Euro-area industrial production rose 1.8 percent in November, the biggest increase since May 2010, the European Union’s statistics office said this week. A separate report last week showed economic confidence in the region improved in December to the highest since July 2011.