SPAIN saw the cost of its debt rise to three-year highs at an auction yesterday, despite a solid level of investor demand.
Madrid sold at the higher end of its €3.5-4.5bn target range, but buyers demanded yields on the one-year and 18-month bonds that were around 20 basis points higher than at the last equivalent sale. The average yield came in at about 3.59 per cent.
It is not clear whether the European Central Bank (ECB) intervened in the sale. The Bank recently restarted its bond-purchasing programme in order to keep a lid on yields for Spain and Italy, but it is thought that its actions have centred upon Italy, which has the fourth biggest bond market in the world.
Italy’s surprise downgrade by credit ratings agency Standard & Poor’s yesterday was bad timing for the bond sale, with Spain’s secondary market yields spiking in the morning as the auction got underway.