Fed lends unexpected hand to the markets

The Spanish Treasury took advantage of favorable market conditions to exceed its issue target at Thursday’s auction of medium- and long-term bonds at lower rates.

The stock market was also boosted by the US Federal Reserve’s decision to continue with its quantitative easing program, in contrast with investor fears that the US central bank would announce a tapering off of its bond purchases.

The Treasury sold 3.074 billion euros in three- and 15-year bonds when it was looking to place 3 billion euros. Demand for both issues was almost 7.5 billion euros.

It sold 2.064 billion euros in bonds maturing in 2016 at a cut-off yield of 2.244 percent, down from 2.656 percent at an auction held at the start of August.

It sold a further 1.016 billion of 15-year bonds at a marginal yield of 4.829 percent. The last public tender for paper of this maturity was held in March 2011. However, a syndicated sale of 15-year bonds in July produced an average yield of 5.194 percent.

“The Fed’s decision was very good for higher-risk assets such as Spanish debt,” Reuters quoted IG Markets analyst Daniel Pingarrón as saying. “You can see that when it comes to deciding between risk and yield, investors are opting for yield.”

The blue-chip Ibex 35 index closed up 1.01 percent at 9,153.70, a new high for the year so far.