Forexpros – Spain saw borrowing costs surge at an auction of three- and six-month government bonds on Tuesday, a day after the country formally requested help to rescue its ailing banking sector.
Spain’s Treasury sold EUR1.6 billion worth of three-month government bonds at an average yield of 2.362% earlier in the day, up sharply from 0.846% at a similar auction last month.
Demand was weak, with bids exceeding supply 2.60 times versus a “bid-to-cover” ratio of 3.95 in May.
Spain also sold EUR1.48 billion of six-month debt at an average yield of 3.237%, up from 1.737% at a similar auction last month. The bid-to-cover ratio stood at 2.80, compared to 4.30 at an auction in May.
In total, Spain’s Treasury sold EUR3.08 billion of government debt, above the full targeted amount of EUR3 billion.
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.
The yield on Spanish 10-year bonds rose to 6.67% following the auction, up from 6.63% before the results. Yields hit a record high 7.28% on June 18.
Meanwhile, the euro turned lower against the U.S. dollar, with EUR/USD easing down 0.09% to trade at 1.2493.
European stock markets erased gains. Spain’s IBEX 35 Index dipped 0.1%, the EURO STOXX 50 fell 0.1%, France’s CAC 40 dipped 0.3%, Germany’s DAX declined 0.1%, while London’s FTSE 100 was flat.
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