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Spain bond auction: Borrowing costs edge up | |
(40 minutes later) | |
There was strong demand for Spanish bonds at an auction on Thursday, which was seen as a key test of the country's ability to raise funds, but it had to pay a higher interest rate. | |
The rate on the 10-year bonds was 6.044%, up from the 5.743% paid when bonds were last sold in April. | |
Spain sold 2.1bn euros ($2.6bn; £1.7bn) in medium and long-term bonds. | |
It comes as European authorities are said to be working on a way to help Spain's troubled banking sector. | |
UK Chancellor George Osborne said: "I know they are working very hard on an imminent solution." | UK Chancellor George Osborne said: "I know they are working very hard on an imminent solution." |
He told the BBC: "I am optimistic that people are working hard on a solution, and a solution, I think, is coming." | He told the BBC: "I am optimistic that people are working hard on a solution, and a solution, I think, is coming." |
'Prohibitive rates' | |
There was demand for 3.3 times as many Spanish 10-year bonds as were available on Thursday. | |
The Treasury sold 638m euros of 2-year bonds at a yield of 4.335% and 825m euros of four-year bonds at 5.353%, in addition to the 611m euros of benchmark 10-year bonds. | |
The yield on Spanish 10-year bonds from previous auctions, known as the secondary market, fell below 6.1% in trading on Thursday, having recently risen above 6.7%. | |
"Although the yield on the 10-year is just a tad below secondary market levels, these are prohibitive rates which underscore the dramatic deterioration in Spain's perceived creditworthiness," said Nicholas Spiro of Spiro Sovereign Strategy. | |
"If it wasn't for its banks' continued support at auctions, Spain would be unable to sell its debt." | |
Spain is keen to avoid a full international bailout, which would be politically damaging and come with strict economic conditions. | Spain is keen to avoid a full international bailout, which would be politically damaging and come with strict economic conditions. |
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms: AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule. Glossary in full | |
It favours a bailout targeted directly at its banks, rather than at central government. | It favours a bailout targeted directly at its banks, rather than at central government. |
German Chancellor Angela Merkel will be meeting UK Prime Minister David Cameron later in the day. | German Chancellor Angela Merkel will be meeting UK Prime Minister David Cameron later in the day. |
Ahead of the meeting, she has been talking about the need for Europe to have more power. | Ahead of the meeting, she has been talking about the need for Europe to have more power. |
"We need not just a currency union; we also need a so-called fiscal union, more common budget policies," she said. | "We need not just a currency union; we also need a so-called fiscal union, more common budget policies," she said. |
"We need above all a political union. That means that we must, step by step as things go forward, give up powers to Europe." | "We need above all a political union. That means that we must, step by step as things go forward, give up powers to Europe." |
She spoke on Wednesday to US President Barack Obama, who also called Italian Prime Minister Mario Monti to discuss economic conditions in Europe. | She spoke on Wednesday to US President Barack Obama, who also called Italian Prime Minister Mario Monti to discuss economic conditions in Europe. |
Mr Obama and Mr Cameron also called jointly for an "immediate plan" to restore confidence. | Mr Obama and Mr Cameron also called jointly for an "immediate plan" to restore confidence. |
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