Spain bond sale falls short of top-end target

Wed Dec 5, 2012 6:39am EST
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By Paul Day

MADRID (Reuters) - Spain fell short of its targeted amount at a triple bond auction on Wednesday, prompting a rise in yields on the secondary market as investors await the government's move to trigger European Central Bank bond-buying.

The Treasury sold 4.3 billion euros ($5.6 billion) of bonds compared to a target range of between 3.5 billion and 4.5 billion euros, including 1.1 billion of its 10-year benchmark.

The 10-year yield fell to 5.290 percent from 5.458 at the last auction but offered little or no premium to the rate at which banks were trading the paper ahead of the auction - a sign of a weak result.

The Treasury also sold a bond maturing October 31, 2015 at a lower yield than the previous auction while another due July 30, 2019, at a higher yield than at a previous auction of the same paper in January.

"A bit disappointing that they didn't manage to raise the full amount," said Nick Stamenkovic, strategist at RIA Capital Markets.

"The sheer scale of issuance next year and the lack of demand from domestic investors suggest to me that it's just a matter of time before Spain has to make an official bailout (request) but that's a story for early 2013," he said.

Yields in Spanish bonds have fallen from highs of more than 7 percent reached over the summer, easing the feeling of crisis in the euro zone thanks largely to an ECB bond buying plan that requires an official request for aid to swing into action.

In Madrid's broader battle to rebalance its economy and get its debt down, yields remain high for a country facing another year without economic growth.   Continued...

A trader gestures during a Spanish bond auction in Madrid December 5, 2012. REUTERS/Andrea Comas