DEBT MARKET

Spanish Treasury pays lowest rate on three-year bond since the euro was introduced

Marginal yield on notes maturing in 2017 drops to 1.620 percent

The Spanish Treasury took advantage of much improved market conditions to sell three-year bonds at the lowest yield since the euro was introduced.

The debt-management arm of the Economy Ministry sold 2.662 billion euros in bonds maturing in April 2017 at Thursday’s tender of medium-to-long term paper at a cut-off rate of 1.620 percent, which was the lowest since the current statistical series began in 1993. During the height of the financial crisis in the first half of 2012, three-year bonds were sold at yields of around 5.5 percent.

The Treasury last week also placed 5-year bonds at the lowest rate since the single currency was introduced in 1999.

“Getting cheaper funding is important in making debt sustainable,” Bloomberg quoted Ciaran O’Hagan, head of European rates strategy at Société Générale in Paris, as saying. “If interest rates fall, Spain gets cheaper and cheaper levels at each auction and that helps to restore confidence in the longer-term outlook,” he said.

In the other two tranches of the tender, the Treasury sold 1.811 billion euros in bonds maturing in 2026 at a marginal rate of 4.012 percent, down from 4.488 percent at a tender held in November. It placed a further 1.442 billion euros in 15-year bonds at a marginal rate of 4.223 percent. The total amount issued came to 5.915 billion euros, above the Treasury’s target of 5.5 billion. The amount of bids submitted was close to 11.3 billion euros.