Spanish banksâ€™ borrowings from the European Central Bank jumped by almost 50 percent in March, reaching the most on record, as lenders tap emergency loans and channel some of it into sovereign debt purchases.
Average net borrowings by Spanish banks climbed to 227.6 billion euros ($300 billion) last month from 152.4 billion euros in February, the Bank of Spain said on its website today. Spanish lenders took 29 percent of the total long-term loans offered to euro-region banks, the data showed. That includes the three-year long-term refinancing operation loans known as LTRO.
Spanish banks are using some of the emergency loans to support the nationâ€™s debt market as Treasury data shows banks have piled up holdings of Spanish bonds. While that helped tame the countryâ€™s borrowing costs, it also meshes more closely together the risks to lenders and the sovereign, Economy Minister Luis de Guindos said this week.
â€œThe whole point of the LTRO was to incentivize the banks in ailing countries to take as much liquidity as they could, and the Spanish banks have done just that,â€ Gilles Moec, co-chief European economist at Deutsche Bank, said by phone.
Spanish bonds fell, pushing the 10-year yield to 5.93 percent at 11 a.m. in Madrid from 5.82 percent yesterday, and widening the gap between Spanish and German borrowing costs to 416 basis points.