Spain has passed the first test of investor demand for its government bonds since the latest downgrade of Madrid’s credit rating by S&P.
It sold almost 4.88 billion euros of short-term treasury bills and had to pay only around half the amount of interest that was necessary for similar bonds in December.
However there will be a far trickier auction on Thursday for loans maturing in 10 years.
Spain’s public finances remain under the market microscope and demand for its bonds that extend beyond the duration of the ECB money is uncertain.
Analysts said market sentiment had also been boosted since then by action by the new government elected in November to tackle the budget deficit after a steep overshoot in 2011, and by its plan to raise taxes despite pre-election promises not to.
Traders said the European Central Bank took action on Monday by buying bonds issued by Italy – the other major euro zone economy at the sharp end of the debt crisis – as well as Spain.
That offset pressure from the salvo of S&P downgrades, though the rising risk of a disorderly default in Greece weighed on markets.