Spanish borrowing costs jumped at a bond auction, jolting wider European markets, as this week's tough budget failed to calm investors' nerves about the country's finances.
Madrid sold 2.6 billion euros (£2.18bn) of medium-term paper, at the low end of its target range, and two out of three of the yields rose slightly above analysts' expectations.
"The Spanish Treasury failed to raise the maximum amount and yields, bid-to-cover ratios are lower than the previous auctions and all in all suggests investors remain very cautious towards Spanish bonds at the moment," said Nick Stamenkovic, rate strategist at RIA Capital Markets.
The average yield of a bond maturing in 2015 was 2.890 per cent, up from 2.440 per cent when it was last sold on March 15, but below analysts' expectations of around 3.1 per cent.
A 2016 bond, however, yielded 4.319 percent after 3.376 percent a month ago and analysts' expectations of 3.95 percent, and a bond maturing in 2020 yielded 5.338 percent on average up from 5.156 when it was last sold in September. Analysts had forecast 5.2 percent.
European shares extended their losses after the auction and the cost of insuring Spanish and Italian debt against default rose. Spanish yields rose on the secondary market, where the key 10-year bond was up around 25 basis points close to 5.7 per cent.
City A.M. Reporter