Crisis pushes Spanish bond yields up to 2008 levels

Treasury punished at T-bill tender due to lingering uncertainty over deal on the euro

At Tuesday's bill auction, the Spanish Treasury paid the price for the uncertainty surrounding the European Union summit meeting on Wednesday to address the euro-zone sovereign debt crisis.

The Economy Ministry's debt-management government arm was required to push up the yields it offered on three- and six -month bills to levels last seen in 2008.

The government of Italian Prime Minister Silvio Berlusconi was under pressure to turn up at Wednesday's summit with concrete progress on the reform front, while doubts remain over whether an agreement to beef up the European Financial Stability Facility (EFSF) bailout fund will be reached at the meeting.

Healthy demand

The Treasury awarded 1.385 billion euros in three-month bills at a cut-off rate of 2.350 percent, up from 1.749 percent offered in the previous tender held on September 27. It issued a further 2.095 billion euros in six-month paper as the marginal rate climbed to 3.349 percent from 2.730 percent.

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The total amount sold for both issues was just slightly below the maximum target set by the Treasury of 3.5 billion euros. Bids totaled 9.666 billion euros, with demand for the three-year issuing outstripping the amount sold by 3.07 times, up from 2.47 times last month. The bid-to-cover ratio for the six-month issue fell to 2.59 times from 3.95 times in September.

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