Spain managed to sell 2.54 billion Euros worth of 2-year and 10-year debt certificates this morning. The auction has been viewed as a success seeing as yields remained below the crucial 6% level and the bid-to-cover ratio increased from last time around.
Spain sold 1.425 billion in 10-year bonds at a maximum yield of 5.788% (up from 5.4%) with a bid-to-cover ratio of 2.4 (up from 2.2). Spain also sold 1.116 billion Euros of 2-year bonds at a maximum yield of 3.463% with a bid-to-cover-ratio of 3.3 (up from 2.0).
Whilst viewed as a success the auction did see a rise in bond yields which underlines the high degree of concern surrounding Prime Minister Mariano Rajoy’s ability to bring the country into sustainable growth. The Euro has not made any significant movements in the currency markets following the auction results, as investor optimism regarding the strong demand for debt has generally been stemmed by the subsequent rise in yields.
The Pound to Euro exchange rate is still at a 19-month high of 1.2219 and the Euro to US Dollar exchange rate is stable on the day at 1.3118.
Spain’s economic problems stretch so far that a mildly successful bond auction can only alleviate a very small amount of stress; the ongoing unemployment crisis (23.3% unemployment, 50% youth unemployment), deteriorating investor confidence, potentially self-defeating austerity measures, and the sincere threat of a Portuguese/Irish/GreekX2-esque bailout package ensure that Spain remains firmly under the economic ‘cosh’.
Comments are closed.