Tuesday, March 12 15:43:47
Renewed investor confidence in Spain prompted the Treasury to announce a special triple-bond auction today after one-year borrowing costs fell to their lowest level since the Greek debt meltdown in 2010.
The story was different in Italy, where that country's government saw one-year borrowing costs rise to their highest since mid-December at the first debt sale after Fitch's downgrade of its sovereign rating to BBB-plus.
Italy and Spain, the euro zone's third and fourth largest economies, have been under intense scrutiny amid fears a prolonged economic slump and high public and private debts in southern Europe are unsustainable.
Strong demand for Spain's short-term bills, when the Treasury sold more than targeted of 6- and 12-month bills at an auction, was followed by a Treasury announcement later on Tuesday of an unscheduled triple-bond sale of long-term debt for March 14.
The Treasury sold 5.8 billion euros of the short-term bills today, above the upper end of the 4.5 billion to 5.5 billion euro target and with average yields on the six-month paper falling to levels not seen since Feb. 2012.
Spain later announced it planned to sell bonds due 2029, 2040 and 2041 at special, off-calendar auction on Thursday.
"It's a good moment for this and could be due to a need to feed a long-term market. There will certainly be demand at these maturities and it tests the strength of the market and sends a signal of confidence," said Jose Luis Martinez, Madrid-based strategist for Citi.
A pledge by the European Central Bank to buy debt of troubled euro zone members has helped to create a backstop against a mass sell off of debt in Spain and Italy and helped offset nerves following the Italian elections and downgrade. Reuters