Spain’s efforts to cut the euro region’s third-biggest deficit may not avert record borrowing costs, as investors speculating on a bailout for Ireland or Portugal trash the bonds of Europe’s peripheral countries.
Spain’s plan to offer cash-strapped regional administrations emergency loans leaves the Treasury with 12 billion euros ($15 billion) of additional funding needs that the government says won’t affect its borrowing plans.
Spain paid more than Greece and Portugal to sell three-month bills as the newly elected People’s Party called for a European agreement to “save” the nation’s debt, saying the country can’t afford 7 percent interest rates.
German two-year government note yields declined from near their highest in almost three months as stocks fell and Hungary failed to meet its target at a debt sale, stoking demand for the safest fixed-income assets.
Investors bought all 3 billion euros ($3.8 billion) of 15-year bonds offered by Spain, with demand strong enough to ease concern the nation would struggle to cover debt payments after Greece’s bailout.