One-year bill yield falls to record low at Treasury auction

The yield on the one-year bill at the Spanish Treasury’s auction on Tuesday fell to the lowest level on record as Spain distanced itself further from the market traumas it suffered in the summer of last year.

The Treasury sold 3.710 billion euros in 12-month bills at an average rate of 0.678 percent, down from 0.961 percent at the previous tender. The marginal rate declined to 0.713 percent from 0.980 percent. The bid-to-cover ratio was 1.9 times.

The debt-management arm of the Economy Ministry sold a further 840 million euros in six-month bills. Here the average rate declined from 0.672 percent to 0.494 percent as the marginal yield fell to 0.500 percent from 0.680 percent. Demand exceeded the amount sold by 5.3 times.

The total amount sold at the tender was 4.550 billion euros, just above the Treasury’s target of 4.5 billion.

This was the first auction held since the Eurogroup agreed last Thursday to Spain making a clean break from the program of measures imposed as part of its 41.3-billion-euro bailout to clean up the banking sector.

The European Central Bank’s surprise decision at the start of this month to lower its key interest rate to a record low of 0.25 percent has also helped underpin the sovereign debt market. Spain’s risk premium now stands at under 240 basis points after hitting euro-zone record highs of well over 600 basis points in the summer of last year.