T-bill rates fall to historic lows at tender

The Spanish Treasury on Tuesday took advantage of investors’ greatly enhanced confidence in Spain’s sovereign debt to issue six-month and one-year bills at the lowest yields on record.

The cut-off rate in the six-month issue declined to 0.390 percent from 0.525 percent at the previous tender held on January 28, while the marginal yield on the 12-month bills fell to 0.628 percent from 0.740 percent. At the height of the euro crisis in the summer of 2012, investors were demanding yields of up to 3.95 percent on six-month paper and 5.20 percent on one-year bills. Shortly after that the situation started to ease after European Central Bank President Mario Draghi pledged to do everything within his power to save the single currency and rolled out a bond-purchasing program in the secondary market.

The Treasury on Tuesday issued a total of 4.524 billion euros in bills, including 930 million of the shorter maturity and 3.594 billion of the longer. Demand for the six-month tranche was 5.53 billion and over 9 billion for the 12-month bills.

Earlier this month, the Treasury issued 5.589 billion euros in three- and five-year bonds, also at historically lower yields, reflecting much improved conditions in the secondary market where the benchmark 10-year government bond is trading at levels last seen in 2006, when Spain was still enjoying an economic boom fuelled by real estate.

The Treasury has issued 28.188 billion euros in medium- and long-term debt since the start of the year, 21.1 percent of its target for the year of 133.3 billion euros.