Spain to pay highest interest rates on treasuries since 1997

The details. They are so important and yet, on many occasions, so overlooked. Throughout the crisis people have overlooked details, compromising whatever rulings, analyses and assessments have been carried out. And once again the details were overlooked when the Spanish treasury issued 12- and 18-month notes yesterday.

Was the debt sale good? Yes, in some ways. Well, was it bad? Yes, there were bad parts, too. How did things turn out for the markets? Very well given in that Spain raised 3.040 billion euros with the issue, which was more than the 3 billion euros that it predicted in advance. And demand for Spanish debt crept upward throughout the day.

The bullish trend gave a break to Spanish public debt, which dropped from a daytime high of 7.16% to 7.04% after rallying to 7.19% at one point. Simultaneously, the risk premium, which measures the spread between German and Spanish 10-year bonds to indicate the riskiness of the Spanish debt, cooled off from 575 basis points to 551 basis points. They topped out at 579 during day.

What the crisis cost

Investors reaction to the debt issue proved that, as market sources confirm, their real worry is Spain's ability to continue financing debt. From what was seen yesterday, it is doing just that.

Continued demand for Spanish debt supports that Spain can can continue to finance itself. In total, there were more than 8 billion euros in treasury bids: 5.181 billion for 12-month notes and 2.824 for 18-month notes. The combined total allowed Spain to meet and exceed its goal (between 2 and 3 billion euros) and beat May's bid volume. A month ago, bids exceeded offers by 1.84X for 12-month notes and 3.23X for 18-month notes. Yesterday, these figures crept up to 2.16X and 4.42X, respectively.