Forexpros – Spain saw borrowing costs rise at an auction of two, five and seven-year government bonds on Thursday, as concerns over the deteriorating health of the euro zone’s fourth largest economy persisted.
Spain’s Treasury sold EUR1.36 billion worth of two-year government bonds at an average yield of 5.204% earlier in the day, up from 4.706% at a similar auction last month.
Demand was significantly weaker, with bids exceeding supply 1.90 times versus a “bid-to-cover” ratio of 4.26 in June.
Spain also sold EUR1.07 billion million of five-year debt at an average yield of 6.456%, up from 6.072% at a similar auction last month. The bid-to-cover ratio stood at 2.10, weakening from 3.44 at an auction in June.
The country also auctioned EUR548 million of seven-year debt at an average yield of 6.701%, compared to 4.832% at a similar auction last month. The bid-to-cover ratio stood at 2.90, compared to 3.27 at an auction in June.
In total, Spain’s Treasury sold EUR2.978billion of government debt, at the top end of the targeted range of EUR2-3 billion.
The yield on Spanish 10-year bonds rose to 7.0% following the auction, a level widely viewed as unsustainable in the long run.
Meanwhile, the euro turned lower against the U.S. dollar, with EUR/USD dipping 0.12% to trade at 1.2270.
European stock markets came off their highest levels of the session. Spain’s IBEX 35 Index trimmed gains to trade little changed, the EURO STOXX 50 rose 0.2%, France’s CAC 40 added 0.2%, Germany’s DAX rose 0.4%, while London’s FTSE 100 eased up 0.1%.
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