Treasury falls short of target at bond tender

Just a day after Russia said it would no longer be buying Spanish or Irish government debt, the secretary of state for finance, Carlos Ocaña, yesterday insisted investors' appetite for issues by Spain remains healthy.

Appearing before the Senate committee on the economy, Ocaña said that the markets view Spanish government debt as being no less attractive than that of other euro zone countries.

Ocaña was speaking as the Treasury held its latest bond tender, which garnered acceptances below the amount it was targeting, as tensions returned to the peripheral euro-zone sovereign debt markets. The government's debt-management agency said it issued 3.386 billion euros in five-year paper, compared with a target of 4 billion euros.

The government was also obliged to raise the cut-off rate for acceptances to 3.601 percent from 2.997 percent at the previous auction for paper with the same maturity. Demand was also relatively low at 5.413 billion euros, yielding a so-called bid-to-cover ratio of 1.6 times.

"From the point of view of the amount sold and the bid-to- cover, it's not a stellar auction," Bloomberg quoted Chiara Cremonesi, a fixed-income strategist at UniCredit Bank in London, as saying. Cremonesi estimated Spain still has to issue 12 billion euros over the next three bond auctions, unless the Treasury changes its borrowing plans.

Ocaña said there are "very clear" signs the government is starting to bring its budget deficit under control and that the economy is poised for a recovery. What investors need to know, he said, is that they will get their money back "with the corresponding interest payments."

The budget deficit in the first nine months of the year narrowed by 42.1 percent from a year earlier to 36.363 billion euros, or 3.45 percent of GDP.