Run this test: take a high yield on a near-term government bond, mix that with a lot of noise about the trustworthiness of private banks and savings banks, and add an aggressive publicity campaign highlighted with television adds. What are the results? The same thing that happened yesterday to the Spanish Treasury. That is to say, the highest demand in history for state-issued debt at terms of 12 and 18 months.
In total, the treasury received requests for 18.277 billion euros in debt. Or if you prefer, around two percent of the wealth that the entire Spanish economy generates each year.
That much money in a single debt issue marked by widespread problems with sovereigns that has brought a substantial increase to bond yields. The entire financial sector has also been riddled with problems that have kept savings away from traditional deposits.
The heavy appetite for Spanish debt provided two additional gifts to the treasury. First, it allowed them to bring in more capital than predicted. It was anticipated that they would get between 3.25 and 4.25 billion euros, but thanks to the avalanche of requests this figure jumped dramatically and requests totaled 4.94 billion euros, 3.44 million of which came from 12-month notes and the remaining 1.49 billion from 18-month notes.
