Spanish Bond Sale Succeeds as Data Show Euro-Zone Slump

Español: Mariano Rajoy en Valladolid (España) en septiembre de 2008. (Photo credit: Wikipedia)

 Paris sept.20 stock picks . — Spain sold debt Thursday in an auction that met with strong investor demand despite questions about the country’s bailout plans, as a report suggested the contraction of the 17-nation euro zone economy is accelerating. The Spanish Treasury sold 4.8 billion euros, or $6.2 billion, of three- and 10-year bonds, more than the 4.5 billion euros it had targeted for sale. The ten-year bonds were priced to yield 5.666 percent, well below the 6.647 percent it received at a similar auction on Aug. 2.

The lower yields suggests that investors are more comfortable holding Spanish debt. Euro zone fears have abated markedly since Sept. 6, when Mario Draghi, the president of the European Central Bank, said the E.C.B. was prepared to buy Spanish and Italian government bonds in “unlimited” quantities, if necessary, to end the pressure on the 17-nation currency bloc.

The complication for Spain is that the government of Prime Minister Mariano Rajoy wants to avoid the strings that E.C.B. help would inevitably entail. He said last week that the falling yields might make such help unnecessary.

Spain has also been promised up to 100 billion euros in aid for restructuring its banking sector. Mr. Rajoy has said those loans should be made directly to the banks, rather than through the Spanish government, so as to avoid an increase in metrics of sovereign debt. That aid will not be forthcoming until questions about a new banking supervisory system for the euro zone are answered. ... Continue to read.

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