Spain demonstrated on Thursday that it could still borrow on the international credit markets – and what was more at an affordable, though rising, rate of interest.
As efforts continue for a European rescue of its debt-stricken banks, Madrid sold 2.1 billion euros worth of government bonds with strong demand from investors.
The interest rate was a fraction over six percent on bonds that have to be repaid in 10 years time; up from 5.74 percent last month
The success of the auction comes on talk of a rescue for Spanish banks and it eases the worries about how Madrid will finance its budget deficit, which is the third largest in the eurozone.
It also showed Treasury Minister Cristobal Montoro was wrong when he said on Tuesday that Spain was being shut out of the credit markets because of the huge debts of the country’s banks.
Alessandro Giansanti, bond strategist with ING bank in Amsterdam, said: “There is a better environment over the last few days for Spanish bonds. Talk of a rescue for Spanish banks is the thing that is reducing risk aversion in the markets.”