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PUBLIC FINANCES

Treasury pays under one percent on one-year bill for first time since 2010

Spanish debt-management agency close to completing issue target for the whole year

Spanish Economy Minister Luis de Guindos.
Spanish Economy Minister Luis de Guindos.SAUL LOEB (AFP)

The Spanish Treasury paid under an average 1 percent on 12-month bills at a debt tender held on Tuesday, the first time this has been the case since Greece asked for its first bailout in April 2010.

The debt-management arm of the Economy Ministry issued 4.570 billion euros in six- and 12-month bills, 20 million more than its target. Of the total it issued 3.75 billion euros in 12-month paper at a marginal yield of 0.98 percent and an average of 0.961 percent, down from 1.39 percent in September. It placed a further 817 million euros in six-month bills at a cut-off rate of 0.68 percent, down from 0.945 percent a month ago.

Since the start of this year, the Treasury has issued a gross 197.6 billion euros in debt, compared with its target for the year of 230 billion. The total includes an issue of 4 billion euros in 30-year bonds for the first time since 2009, showing the renewed appetite of investors for Spanish debt.

After at one point looking like it might have to join Greece, Ireland and Portugal in asking its European partners for a full-blown bailout, Spain’s risk premium has narrowed considerably since European Central Bank President Mario Draghi last year pledged to do everything in his power to save the euro. The spread between the yield on the Spanish benchmark 10-year bond and the German equivalent has fallen from levels of well over 600 basis points in July of 2012 to around 240 basis points currently.

Spain looks set to emerge as planned in January of next year from the 41-billion-euro bailout it received from the European Stability Mechanism to clean up its banking system. At one point there had talk about the benefit of extending the program beyond that date as a safeguard. However, the consensus at Monday’s Eurogroup meeting of finance ministers was that there was no need for this.

“The program is being fulfilled in all its phases, and therefore, the central scenario at this point is that the program for the Spanish banking system will expire at the end of the year,” Economy Minister Luis de Guindos said Monday.

Spain is also expected to have emerged from its longest recession in close to half a century in the third quarter of this year.

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