Spain continues to enjoy success with its debt offerings. Preparing for the 2013 uphill battle. Average yield on the offering was 5.517 percent which are a definitive improvement from the 7 percent levels seen in July for Spanish debt.
Spain sold 3.6 billion euros of a bond maturing October 31, 2015, 645 million euros of a bond due July 30, 2017 and 1.5 billion euros of paper maturing April 30, 2021.
Concerned that the welfare system could slip into deficit this year, from a balanced budget target, the economy ministry said separately that the social security reserve fund will subscribe a new 3.3 billion euros 5-year sovereign bond.
Madrid is also expected to help struggling regional governments, cut out of debt markets, which could add a further 40 billion euros to its debt bill.
Spain’s economy has been in recession for a year, the second since 2009, and is not expected to return to growth until late next year at the earliest. Some 25 percent of Spanish workers are unemployed and deep spending cuts and tax hikes have fuelled increasingly violent protests across the country.
However, Spain’s risk premium versus Germany has fell to around 423 basis points from above 650 bps since the European Central Bank said it would buy up debt on the open market to hold down interest rates for any country that signs up for aid.
Madrid has said it wants to be sure the ECB measure would reduce financing costs, citing a spread of 200 bps as more representative of economic fundamentals, though the central bank’s head, Mario Draghi, said he could not make such a promise.
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