Spain beats target at short-term debt sale, yields fall
By Paul Day
MADRID (Reuters) - Spain raised more than expected at a T-bill sale on Tuesday, with yields nearly halving on the shortest-dated paper as its debt remained unaffected by the contagion from emerging markets that has hit Spanish stocks.
Demand for the three-month paper was especially high, though the Treasury is choosing to rein in the sale of short-term debt as it shifts its focus to longer bonds in an effort to extend the average maturity of its debt portfolio.
The Treasury sold 3.1 billion euros of 3- and 9-month bills compared with a target range of between 2 billion and 3 billion euros.
"People are in the game for Spain at the moment and I don't think the emerging market concerns are having much effect," said 4Cast strategist Bhavisha Patel.
Spain's sooner-than-expected return to economic growth and successful efforts to reduce its budget shortfall have helped fuel investor enthusiasm for the country, which came close to requesting a sovereign bailout at the height of the euro zone crisis.
Economy Minister Luis de Guindos said on Tuesday he expected 2014 GDP to grow close to 1 percent compared to an official forecast of 0.7 percent.
Tuesday's shorter-dated T-bill saw demand outstrip supply by 5.2 times and sold at an average yield of 0.343 percent compared to 0.631 percent when it was last auctioned on December 17.
The yield on the 9-month paper fell to 0.655 percent from 0.841 percent previously, with demand less than for the shorter dated bill and below that registered at the previous auction. The Treasury sold 2.2 billion euros of the 9-month bill and 937 million euros of the 3-month bill.
Spain has said it aims to break even in bills this year, while issuing a net 65 billion euros in long-term bonds.
Over 70 percent of the bonds it has sold so far this year have carried a maturity of ten years or more.
CONTAGION-FREE?
Spanish shares have been hit in recent days by a currency crisis in Argentina.
Although the premium investors demand to hold Spanish 10-year debt rather than the German benchmark has increased slightly over the last few days, weaker euro zone bond markets have come under more pressure from currency weakness in Turkey and Russia.
Demand for Spain's paper has also remained high at primary auctions.
Spanish debt sales, under severe pressure during the worst of the debt crisis in 2012, have seen increasing interest by investors in search of a relatively high yields.
A 10-year syndicated bond last week prompted bumper demand, further boosted by rising optimism for an economic recovery in the country.
Economy Minister Guindos said Spain's public deficit, which was around 5.44 percent of GDP to November, would converge to meet the target of 6.5 percent by the end of the year, helped by a saving in interest payments on debt and an increased tax intake from a sooner-than-expected return to economic growth.
(Editing by Julien Toyer, John Stonestreet)
