Spain paid sharply higher yields to sell €3.3 billion of bonds today after a renewed market attack that has driven its costs of borrowing close to unsustainable levels.
The Treasury sold €2.2 billion of a 2014 bond, and €1.1 billion of a 2015 bond, bringing the total sale close to the top end of the Treasury's €2.5 billion to €3.5 billion target range.
Spanish yields have soared to their highest level since the inception of the euro as a still-deepening debt crisis threatened to swallow the larger economies of Italy and Spain.
Average yields for both Spanish issues were the highest at a Treasury sale of such maturities since 2000.
Dealers said that demand had been helped by market talk the European Central Bank would re-start its bond buying programme to aid the struggling peripheries.
The bond sales were the first since prime minister Jose Luis Rodriguez Zapatero called early elections last week, adding to uncertainties ahead for Spain as it battles to generate more economic growth and escape the crisis.
Mr Zapatero delayed holidays this week to discuss ways out of the turmoil with ministers and will stay in Madrid today, his 51st birthday.
The average yield on the 2014 bond was 4.813 per cent, up on the 4.037 per cent the last time it was sold on June 2nd. The average yield on the 2015 bond was 4.984 per cent. The bond was last sold in 2009.
The yields were both below the 5 per cent mark, crossed yesterday on the secondary market.
The yield on the benchmark ten-year bond was around 6 per cent today, close to euro-era record highs.
Analysts remain concerned government financing is unsustainable over a long period at these levels and should they rise above 7 per cent would eventually force Spain to call for a bailout following Portugal and Ireland when they paid similar rates.
The bid-to-cover ratio on the 2014 bond was 2.1, compared with 2.5 in June. The 2015 bond was 2.4 times subscribed.
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