June 7 - Spain saw strong demand when it sold 2.1 billion euros of medium and long-term debt, passing an important test of whether it can still attract investors, just days after a Spanish minister said the country was being cut off from the markets. Joanna Partridge reports.
Slight relief for Spain. Earlier this week Madrid said it was being cut off from the credit markets. But in the first bond sale since those comments, Spain saw strong demand for just over 2 billion euros of its medium and long-term debt. The country had to pay more to sell its debt than in recent auctions - paying just over 6% to sell its ten year bonds. But the sale showed Madrid is still attractive to investors. And that's vital, says trader Javier Ferrer. SOUNDBITE: HEAD OF PUBLIC DEBT DESK AT AHORRO Y CORPORACION, JAVIER FERRER, SAYING (Spanish): "I think the market is pricing in a fundamental rescue for the Spanish financial sector, not for the country itself. The Spanish Treasury has contained the situation very well. The reforms being undertaken in the country are very significant. What's more is that the Treasury with today's auction has almost 60 percent of the debt it needs to issue for this year. It can be comfortable through the summer and a find better moment when yields are lower." The auction also boosted Spain's stock exchange. The euro zone's fourth-largest economy has found itself at the centre of the region's crisis due its struggling banks, says James de Bunsen from Armstrong Investments. SOUNDBITE: James de Bunsen, Armstrong Investments, saying (English): "Investors' moods seem to change from week to week but they're feeling more optimistic beause there has been some rhetoric about addressing problems in the Spanish banking sector. But as yet the problems have certainly not gone away." Despite this temporary respite for Spain, the euro zone needs to work out how to help it revive its banks. The United States is pressuring Europe to take a bold step towards financial and fiscal union and wants to see movement towards this by the G20 summit in the middle of this month. European sources say Germany and EU officials are urgently exploring ways to rescue Spain's debt-laden lenders, although Madrid is still resisting being placed under international supervision. Joanna Partridge, Reuters