"The results are a far cry from the blowout auctions we saw between December and February, which will no doubt be interpreted as the LTRO bid having dried up"
- Peter Chatwell, Interest Rate Strategist at Credit Agricole in London
Spain's cost of borrowing surged after the first auction since the country presented its austerity budget. Yields on 10-year sovereign bonds soared by 11 basis points to 5.52%. The country sold 2.6 billion Euros of debt, close to the minimum target, as demand weakened after effect of LTRO started to fade and concerns over Spain's financial position escalated.
"It's back to reality now, the auction shows the LTRO effect has been exhausted and now demand for Spanish paper is becoming much more price sensitive," said Peter Chatwell, Interest Rate Strategist at Credit Agricole in London.
"Today's auction almost certainly presages a turning of the tide for Spain," claimed Nicholas Spiro, managing director of Spiro Sovereign Strategy. "That the level of issuance was low to begin with makes the result all the more disappointing," he added.
© Dukascopy Bank