Spain’s borrowing rates high

Spain paid sharply higher borrowing rates in a 3.48-billion-euro ($4.83-billion) bond issue yesterday compared to a similar sale in late September, the Bank of Spain said.

A trader watches the index at Madrid Stock Exchange in this file photo. REUTERS photo.

A trader watches the index at Madrid Stock Exchange in this file photo. REUTERS photo.

Rates on three-month bonds increased to 2.292 percent from 1.692 percent previously and to 3.302 percent from 2.665 percent for six-month bonds in a market affected by the eurozone debt crisis.

Higher rates mean Spain must pay more to convince investors to lend it money, indicating weakening confidence in its ability to pay its debts. Demand for the bonds was high however, with bids for 9.6 billions euros’ worth.

Rates had also risen in the last sale on Sept. 27.

Spain has promised to reduce its annual public deficit from the equivalent of 9.3 percent of gross domestic product (GDP) last year to 6 percent of GDP this year, 4.4 percent in 2012 and 3 percent in 2013.

But analysts have cast doubt on these targets because of slower-than-expected economic growth.

The major credit rating agencies Moody’s, Fitch and Standard & Poor’s each cut Spain’s rating this month.

Tuesday, October 25, 2011
MADRID – Agence France-Presse