Spanish Yields Rise to Euro-Era Record

By Emma Ross-Thomas - Nov 17, 2011 5:02 PM GMT+0700
Enlarge image

Spain’s current 10-year benchmark bond yield rose to 6.708 percent after the auction from 6.69 percent before. Photographer: Denis Doyle/Bloomberg

Play Video

Nov. 17 (Bloomberg) -- Vicky Pryce, senior managing director at FTI Consulting Inc., talks about the European Central Bank's purchase of Italian bonds. She speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)

Spain sold 3.56 billion euros ($4.8 billion) of a new 10-year benchmark at an average yield of almost 7 percent, the most since the euro’s creation, as demand for the securities dropped.

The Madrid-based Treasury said it sold the bond due in January 2022 at an average yield of 6.975 percent, compared with 6.69 percent for similar securities on the secondary market before the auction and 5.433 percent when it sold bonds due in April 2021 last month. The bank had set a maximum target of 4 billion euros for today’s sale.

“Tensions are increasing on Spain for sure even as rates remain sustainable for the moment,” Laurence Boone, chief European economist at Bank of America Merrill Lynch in London, said by phone. “This is not necessarily due to Spain itself, but more to the lack of a solution at the European level.”

Rising bond yields from the Netherlands to Finland and Austria indicate European officials are struggling to convince investors they can stem the debt crisis that began in Greece and assure the survival of the 17-nation currency. Spanish bond yields rose today to the highest since the start of the euro, breaching the level that prompted the European Central Bank to start buying Spanish and Italian debt in August.

Demand at today’s auction was 1.54 times the amount sold, compared with 1.76 when 10-year securities were sold in October. That’s the lowest since 2008, according to data compiled by Bloomberg.

Spain’s current 10-year benchmark bond yield rose to 6.708 percent after the auction from 6.69 percent before. The extra yield on Spanish debt over German equivalents was 495 basis points, compared with 460 basis points yesterday.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net