Forexpros – Spain saw borrowing costs rise at a well-received auction of two and ten-year government bonds Thursday, amid concerns the country will be the next euro zone member to seek an international bailout.
Spain’s Treasury sold EUR1.116 billion worth of two-year government bonds at an average yield of 3.463% earlier in the day, up sharply from 2.069% at a similar auction last month.
Demand was stronger, however, with bids exceeding supply 3.3 times versus a “bid-to-cover” ratio of 2.0 in March.
The country also sold EUR1.425 billion of ten-year debt at an average yield of 5.743%, up from 5.338% at a similar auction last month. It was the highest yield in five months.
The bid-to-cover ratio stood at 2.4, compared to 2.17 at an auction in March.
Bond auctions have become key drivers of risk sentiment in recent months, as traders attempt to gauge the ability of indebted euro zone nations to fund themselves.
There have been renewed concerns of further debt contagion in the euro zone in recent weeks amid fears Spain will be the next in the euro zone to require a bailout.
Following the bond auction, the euro trimmed gains against the U.S. dollar to trade largely unchanged, with EUR/USD at 1.3129.
Meanwhile, European stock markets gave back some of their gains. Spain’s IBEX 35 Index turned lower, shedding 0.45%, the EURO STOXX 50 eased up 0.1%, France’s CAC 40 added 0.3%, Germany’s DAX was up 0.2%, while London’s FTSE 100 advanced 0.3%.