Spanish yields still pressured after bond sale

City A.M. Reporter
INVESTORS yesterday piled further pressure on Spain to request aid and trigger a European Central Bank (ECB) bond-buying programme seen as inevitable to help the country finance its debts, with the benchmark 10-year bond rising to just over six per cent.

Short-term lending costs fell slightly from last month but remained high at auction yesterday, offering little hope the country can finance itself at reasonable levels without seeking assistance.

Spain’s deputy prime minister Soraya Saenz de Santamaria said the government was still considering the terms of a European bailout, a condition of ECB help, weighing on investors’ patience.

The Spanish Treasury, taking advantage of improved market conditions since the ECB announced the programme, sold more than the top end of its target of between €3.5bn and €4.5bn of 12- and 18-month T-bills.

Although it was the highest amount sold at a T-bill auction since March and yields were slightly lower than a month earlier, demand for the paper was mixed and yields topped those in the grey market before the auction just a day earlier.

Meanwhile Charles Dallara, the chief negotiator for Greece’s private sector creditors, said yesterday that the country should get cheaper rates on its €130bn aid deal and at least two more years from the US and IMF to repay them.

But better terms could only come after Athens delivers on commitments it has made to fiscal reform, Dallara, managing director of the Institute of International Finance said.

Cash-strapped Greece must come up with nearly €12bn of extra cuts for the next two years to get the money, and it has fallen behind in reforms.