Spain carries off first debt auction of the year with ease

The Spanish Treasury successfully completed the sale of five-year bonds on Thursday in its first debt auction of the year.

Greece and Portugal had helped pave the way for the Spanish issue with their own buoyant tenders earlier this week as moves emerged to beef up the European Union emergency fund and tensions eased in the euro-zone periphery debt markets.

The Treasury said it sold 2.999 billion eurosof paper due April 2016, an amount in line with the top of the target range it had set. Although it was obliged to raise the average yield to 4.590 percent from the 3.601 percent paid in the previous five-year auction in November, the rate was below secondary market levels.

"For the near term I expect we will see some decrease in the pressure on euro-zone periphery debt. It's one thing to say we are seeing good demand at auctions [but] countries are paying substantially more than in previous months," Reuters quoted Luca Cazzulani, deputy head of fixed income at UniCredit, as saying.

Demand for the bonds totaled 6.3 billion euros, 2.1 times the amount sold ? up from a bid-to-cover ratio of 1.6 times in November.

"I think the Spaniards will be quite pleased they got it away with a very high bid-to-cover ratio of 2.1, which is impressive and bodes well for future auctions," Georg Grodzki, head of credit research at Legal & General Investment Management, said in an interview on Bloomberg Television. "Only a few days ago it looked as if they could fail."

Spain's risk premium narrowed after the auction, while the Spanish blue-chip Ibex 35 closed up 2.67 percent after rising over 5 percent on Wednesday in the wake of Portugal's debt auction.

Political momentum is now building for the size and scope of the European Financial Stability Facility (ESFS) to be extended as a pre-emptive move against other euro-zone countries struggling to tame their debt menace following the path of Greece and Portugal in seeking a bailout.

José García Cantera, the chief executive of Spanish bank Banesto, said Thursday the chances of Spain "at this moment" of being the next country to be rescued by the EU are "zero."

Separately, the Portuguese debt management agency IGCP said Thursday it was seeking to sell 750 million eurosin one-year Treasury bills at an auction to be held on January 19.

The IGCP on Wednesday sold 1.25 billion eurosin four and 10-year bonds, with the yield on the longer-dated issue falling to 6.716 percent from 6.806 percent at a tender held in November.