Spain's borrowing costs drop

City A.M. Reporter
Spain's borrowing costs fell at an auction of government bonds on Thursday that saw solid demand in 2012's first real test of appetite for debt from the euro zone's bruised periphery.

But Spain still faces huge challenges this year to meet tough European deficit targets after the government missed its 2011 cost-cutting goal and the economy sinks into recession.

The Treasury raised 10 billion euros (£8.2bn) from the auction of three bonds in the primary market, doubling a target of up to 5 billion euros.

Spain sold 4.3 billion euros worth of a new three-year bond at a yield of 3.384 per cent.

The bond maturing April 30, 2016, sold 2.5 billion euros at an average yield of 3.748 percent, compared with 4.871 percent when it was last auctioned July 7, 2011. It was 2.2 times subscribed.

It sold 3.2 billion euros worth of a bond maturing October 31, 2016 for 3.912 per cent, compared with 4.848 per cent on November 3, 2011. The bond was 1.7 times subscribed.