Spain’s debt costs rise

City A.M. Reporter
SPAIN’S financing costs jumped at a T-bill auction yesterday but demand was solid as a newspaper reported a government move to reassure investors over the strength of Spanish banks.

The Treasury issued just over €5bn in 12-month and 18-month bills. Average yields jumped more than 70 basis points from May’s auction in a sign of the fears of contagion sparked by the Greek crisis.

Nonetheless, healthy demand helped reassuring investors that Spain is in no immediate financial danger and will obtain a respectable result in a more important 10 and 30-year bond auction on Thursday and be able to meet a €16.2bn redemption due by the end of July. Fears over Spain have been fed by concern that the country’s banks face steep losses from property assets, which could mean the government might struggle to afford a bail out.

IEl Pais cited government sources on Tuesday saying that Spain had asked the European Commission to publish results of stress tests on the main European banks to dispel market rumours the country is about to seek Greek-style aid.

Spain’s banking association said stress tests should be made public. On Monday, the government said Spanish banks faced a liquidity freeze in international markets.

Meanwhile, Spain’s largest unions yesterday called for a general strike on 29 September to protest labour reforms the minority Socialist government is pushing as it tried to counter speculation Madrid may need a Greek-style bailout.