Treasury exceeds target at bill auction

The Spanish Treasury exceeded its issue target at Tuesday’s bill auction at rates in line with those seen at the previous tender.

The debt-management arm of the Economy Ministry sold 4.940 billion euros in 12- and 18-month paper when it had been looking to issue up to 4.5 billion.

The auction gives the Treasury a head start in covering next year’s funding requirements as it has already covered the country’s needs for this year.

The auction took place after Moody’s Investors Services decided to strip France of its maximum rating, a move that led some analysts to suggest that issue rates might move higher at Tuesday’s auction.

Specifically, the Treasury sold 4.225 billion euros in 12-month paper at an average yield of 2.797 percent, 10 basis points below the rate offered a month ago. Demand for this tranche of the offer exceeded the amount sold by 2.12 times, down from 2.70 times at October’s tender.

It sold a further 713 million euros in 18-month bills, with the yield rising slightly to 3.034 percent from 3.022 percent last month. The bid-to-cover ratio was steady at around three times.

The government of Prime Minister Mariano Rajoy is still debating whether to seek a bailout from the European Stability Mechanism in order to spark purchases of the country’s sovereign debt in the secondary market by the European Central bank and lower its borrowing costs.