by Ladislav Jakab
WBP Online 

Madrid - Spanish government sold mid-term maturity bonds to cover its debt needs with rising borrowing costs as its debt has become the center of attention of the financial markets in May and June.

Spain sold bonds worth €699.56 million maturing in 2014 with a coupon of 3.4%, with an average yield of 4.706%. In a similar maturity auction from June 6, the average yield reached 4.335%. Bids exceeded the supplied volume 3.97 times in an auction today, compared to 4.26 in auction from June 6.

In an auction of 2015 maturity bonds, the government sold bonds worth of €917.63 million with a coupon of 4.00% at an average yield of 5.547%. In a similar auction held on May 17, Spain sold 3-year long debt worth €371.76 million with a coupon of 4.4% at the average yield of 4.375%. Bids exceeded the supplied volume 3.18 times, compared to the 4.47 in an auction from May 17.

The longest maturity offered 5-year tenor with a given coupon of 5.5%, where Spain sold bonds worth of €602.27 million at the average yield of 6.072%. In the last auction of sovereign bonds maturing in 2017 from May 3, the average yield reached 4.96%. Bid-to-cover ratio representing market demand for bonds reached 3.44 on Thursday, compared to 3.14 from the May 3 auction. 

Accepted yield level in Thursday's auctions are still worsening on the background of negative news stream flowing from the Eurozone region as well as from other parts of the world. 

Flash manufacturing purchasing managers index (PMI) for France remained subdued in June as data from Markit Economics show on Thursday. French flash manufacturing PMI reached 45.3, compared to 44.7 in May.

German manufacturing PMI for June fell further to 44.8 in June, compared to 45.1 in May. 

Yields on the Spanish 10-year government bonds hit an all-time high of 7.24% on Monday, June 18, while Italy's benchmark bonds were trading with yield tags of above 6%. The average yield of the one-year treasury bills auction held on Tuesday reached 5.074% and their 18-month peers reached a yield of 5.107% in the same day.

Meanwhile, a report showed that Spain's bad loans in April climbed to 8.72% of all lending, which is the highest level since 1994 and Banco de Espana, Spanish central bank, announced it is delaying the full report on the state of the banking sector it oversees till September, compared to the primarily planed 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