Spain sold just under €5bn in short-term bonds Tuesday but investor concern over the state of its beleaguered financial sector mitigated the pledge of support from the European Central Bank.
Investors asked for a 2.835 percent return on the €3.56bn in 12-month bills sold by Spain's Treasury, a 70 basis point improvement from the previous auction. Demand for the paper, however, was tepid, with investors bidding €2 for every €1 for sale - only slightly better than the August sale.
Spain also sold €1.02bn in 18-month bills at a yield of 3.07 percent, again at a lower yield than in prior sales but with weaker demand: only €3.6 was bid for every €1 on offer, compared to €4 at last month's auction.
The auction could have been complicated by data from the Bank of Spain, issued only minutes before, which showed bad debts in the country's banking sector rose to a record 9.86 percent of total portfolios. There is also increasing pressure on Prime Minister Mariano Rajoy to accept a full financial bailout from his European Union partners in order to gain access to the ECB's programme of unlimited bond purchases, which investors believe can reduce its borrowing costs and maintain debt market access.