by Ladislav Jakab
WBP Online 

Madrid - Yields of Spanish short-term treasury bills expanded, the average level exceeded the 5% border in the auction on Tuesday, beating figures seen in previous short-term debt auctions.

Spain has sold 1-year long treasury bills in a total volume of €2.4 billion with an average yield of 5.074% compared to a 2.985% achieved in the last similar auction held on May 14. Bid-to-cover ratio in today's auction reached 2.16 compared to 1.84 from May. 

In an auction of the 18-month treasury bills Spain sold €639.3 million worth of bills with an average yield of 5.074% reaching the bid-to-cover ratio of 2.16. In a similar auction held on May 14 Spain sold €711.43 million worth bills with an average yield of 3.302% and bid-to-cover ratio of 3.3.

The auction confirmed a gloomy picture of Spain's debt costs currently seen on the market. The yields on the Spanish 10-year government bonds reached 7.24%, an intraday and all-time high, while Italy's benchmark was trading above 6.16% on Monday.

The Spanish benchmark 10-year government bond yields were trading higher compared to the benchmark of Ireland, but stabilized below 7% following the solid demand shown in today's auctions.

Spain's bad loans in April climbed to 8.72% of all lending, the highest level since 1994, as reported on June 18.

Spain is fighting high unemployment, slumping housing prices and a ballooning budget deficit. The cumulating economical issues caused an arranging of a €100 billion worth bailout for Spain's banks approved by the Eurozone finance ministers on June 9.

Meanwhile Banco de Espana, Spanish central bank announced it is delaying the full report on the state of the banking sector it oversees till September. Originally the report was due to come in July.

An audit of Spanish banks is eagerly awaited by financial markets as an increased need for banking sector recapitalization prompted Eurozone leaders to agree on a €100 billion banking sector bailout.  

To contact the author of the story e-mail ladislav.jakab@wbponline.com

Photo: ISIFA