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Spain borrowing rates fall in bond auction

13 December 2012, 16:39 CET
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(MADRID) - Spain's borrowing costs fell in a bond auction Thursday, hours after European Union leaders reached an elusive deal to create a single banking authority.

The auction of three-year and five-year bonds reaped 2.024 billion euros ($2.6 billion) for the Treasury, giving the right-leaning government more elbow room as it ponders whether to seek a sovereign bailout for the debt-ridden, recession-struck economy.

Spain has already met its 2012 fund-raising target from sales of medium- and long-term bonds to finance state activities and has embarked early on its 2013 programme.

Prime Minister Mariano Rajoy's right-leaning government has resisted seeking a sovereign rescue from the eurozone's bailout fund, which could unlock bond-buying support from the European Central Bank to curb its financing costs.

The latest auction showed Spain's financing costs at lower but still costly levels.

The Treasury paid a yield of 3.358 percent for the three-year bonds, down from 3.39 percent at the previous comparable sale on December 5. It also offered 4.2 percent for the five-year bonds, down from 4.477 percent on November 22.

It was the first chance to measure demand for newly issued Spanish bonds after EU leaders thrashed out a banking supervision deal in a Brussels summit that dragged on into the early hours.

The creation of a bank supervisor is a key step towards allowing eurozone rescue funds to intervene directly in the region's stricken banks, easing pressure on states which now how have foot the bill, adding further to their public debts.

Spain secured funding of up to 100 billion euros from its eurozone partners in June to help rescue its banks, brought to their knees by a mountain of bad debt built up in a property bubble which burst in 2008.


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