Treasury sells 10-year bonds at lowest yield in over a year

The Spanish Treasury continued to take advantage of more favorable market conditions to front-load its funding-raising effort for 2013 after already meeting its needs for this year.

The debt-management arm of the Economy Ministry fell short of its maximum target at the auction of three-, five- and 10-year bonds, but borrowing costs fell, most notably in the case of the 10-year issue, whose yield dropped to the lowest level since September of last year.

The success of the tender came just a day after Finance Minister Cristóbal Montoro acknowledged that Spain might not meet its deficit-reduction target of 6.3 percent of GDP this year. “The formal target continues to be 6.3 percent of GDP, although the EU commissioner for economic affairs, Olli Rehn, estimated that it would come in at seven percent,” the minister said.

The Treasury sold 4.25 billion euros in bonds, compared with a maximum target of 4.5 billion. The yield on the 10-year bond was 5.290 percent, down from 5.458 percent at an auction held in October.

The bulk of the demand was concentrated in the three-year issue, of which the Treasury sold 2.124 billion euros at a yield of 3.471 percent, down from 3.660 percent previously. It sold a further 1.004 billion euros in bonds maturing in 2017.

Spain’s risk premium closed up 20 basis points at 406.