Treasury’s borrowing costs fall to levels of 2010

The Spanish Treasury comfortably beat its issue target at Thursday’s bond tender as its borrowing costs fell to their lowest levels since 2010 amid ample global liquidity.

The debt-management arm of the Economy Ministry sold 4.7 billion euros in three- five- and 10-year bonds when it had set itself a goal of 4.5 billion. Bids amounted to 2.6 times the amount sold.

The auction was held just a day after the Bank of Spain announced that the outstanding debt of the country’s public administrations had risen to a record 913.602 billion euros, equivalent to 86.9 percent of GDP. Debt has now doubled from the levels in 2007 just before the crisis broke.

The cut-off rate on the benchmark 10-year bond at the auction fell from 4.919 percent at an auction held last month to 4.632 percent, the lowest rate since November 2010. The marginal yield on the three-month issue declined to 2.810 percent from 3.046 percent earlier this month, while the yield of the five-year bond dropped to 3.286 percent from 3.579 percent.

“This is a very strong auction result for Spain,” Bloomberg quoted Lyn Graham-Taylor, a fixed-income strategist at Rabobank International in London, as saying in an emailed comment. “This fits in with the overall theme at the moment of a glut of liquidity and hunt for yield seeing a strong bid for peripheral debt and a narrowing of euro-zone bond spreads.”

Since the start of January, the Treasury has now issued 52.479 billion euros in medium- and long-term debt, 43.3 percent of its program for the full year.