SALON

Spain pays lower interest rates in debt auction

Topics: From the Wires,

Spain pays lower interest rates in debt auctionPublic transport workers demonstrate during a partial national rail strike in Barcelona, Spain, Monday Sept. 17, 2012. Hundreds of Spanish train services have been canceled as rail and subway workers staged strikes to protest wage cuts and reforms. State rail company RENFE said Monday it had canceled some 300 high-speed and intercity trains. It said minimum services agreed with labor unions meant that more than 50 percent of trains would run throughout the day. The banner reads in Spanish "No more cutting budgets, transport of Barcelona struggling". (AP Photo/Emilio Morenatti) (Credit: (AP Photo/Emilio Morenatti))

MADRID (AP) — Spain raised €4.5 billion ($5.9 billion) in short-term debt auctions Tuesday that saw it paying sharply lower interest rates amid speculation that the country will eventually seek aid to manage its finances.

The Treasury said it sold €3.5 billion in 12-month bills at an average interest rate of 2.84 percent, down from 3.07 percent in the last such auction Aug. 21. It sold €1.01 million in 18-month bills at a yield of 3.07 percent, down from 3.35 percent.

Demand was more than double the amount offered in the 12-month bills and more than three times for the 18-month bills.

Spain’s borrowing costs have fallen from unsustainable highs in recent months after it said it may apply for international aid — if the conditions are reasonable — and after the European Central Bank said it would buy unlimited amounts of government bonds to help countries like Spain.

The rate for Spain’s benchmark 10-year bonds on the secondary market dropped from over 7.5 percent in July to 5.5 percent last week, signaling a big increase in investor confidence.

But the 10-year rate edged back up toward 6 percent this week as some investors worried about Prime Minister Mariano Rajoy’s perceived procrastination in demanding a bailout.

Spain’s Treasury will test investor confidence again Thursday when it plans to sell up to €4.5 billion in three- and 10-year bonds.

Four countries using the euro have already sought bailouts since the international financial crisis began — Greece, Ireland, Portugal and Cyprus. But the economy of Spain — the eurozone’s fourth largest — is bigger than those of the four bailed-out countries put together. Bailing it out would seriously test the European Union’s finances.

Meanwhile, the economy continues to hurt businesses and banks.

The central bank reported that Spanish banks now have a whopping €170 billion in loans that are at risk of not being paid, a record figure that represents 9.86 percent of their total loans. The bank said that the proportion of non-performing loans in July was up from 9.42 percent in June.

Many of Spain’s banks are loaded with soured real estate investments following the collapse of the country’s property market in 2008. The 16 other countries that use the euro last month agreed to provide Spain with up to €100 billion to help support these banks. Results of a complete stress test of the sector are due to be made known Sept. 28.

Next Article

Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
    Credit: AP/LM Otero

  • Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
    Credit: AP/Matt Rourke

  • A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
    Credit: AP/Jenny Aicher

  • Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
    Credit: AP/Molly Riley

  • Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
    Credit: AP/J. Scott Applewhite

  • Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
    Credit: AP/Carolyn Kaster

  • O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
    Credit: AP/Las Vegas Review-Journal/Jeff Scheid

  • Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
    Credit: AP/NASA/Chris Hadfield

  • When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
    Credit: AP/Jacquelyn Martin

  • A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
    Credit: AP/The Duluth News-Tribune/Clint Austin

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Comments

0 Comments

Comment Preview

Your name will appear as username

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>