LONDON — Spain took advantage of improved market sentiment in the euro zone to sell government debt Tuesday, but questions still lingered over whether, or when, it will seek European help to lower its borrowing costs.
The Spanish Treasury sold 4.6 billion euros, or $6 billion, of short-term debt, and while borrowing costs were slightly lower than in the previous sale, they remained at a high level.
Average yields fell to 2.835 percent on the 12-month bill from 3.070 percent in August, with 3.6 billion euros of the paper sold, Reuters reported. Borrowing costs on 18-month debt were also slightly lower.
Earlier this month the president of the European Central Bank, Mario Draghi, announced an unlimited bond-buying program to relieve the pressure on countries like Spain and Italy, which had seen their borrowing costs soar to levels likely to be unsustainable in the medium term. Governments will need to request help, however, and accept conditions under the plans outlined by the E.C.B.
That could entail considerable loss of face for the government in Madrid, which has been reluctant to take such a step, despite signs that some other nations would like it to end the uncertainty.
Speaking in London on Monday, the French finance and economy minister, Pierre Moscovici, said that it was up to the Spanish government to decide whether it wants assistance but that the euro zone and European Central Bank stood ready to help the government in Madrid if it requested assistance.
"If, and when, the Spanish ask for any solution or any kind of intervention from either the central bank or the member states — after the decisions taken by the E.C.B., after also our exchanges in the Eurogroup — all the tools are available and we will answer to whatever the Spanish government asks, if it does," Mr. Moscovici told reporters. The Eurogroup refers to the finance ministers of euro zone countries, who meet regularly.
"This is a matter of sovereignty," Mr. Moscovici added, "and Spain has to make its decision on its own. I'm not pressuring, I'm not pressing. They have to make their choice, they know exactly what they have to do and they know what the tools are. But of course we have those discussions, they exist."
Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said that sentiment towards Spain was starting to deteriorate in the bond market because of the uncertainty about whether Madrid will request a bond-buying program.
"The Treasury managed to get all its debt out the door this morning, demand was solid, if unspectacular, and yields continued to fall," Mr. Spiro said. "However, the window of opportunity for Spain to issue debt at what are still relatively favorable yields appears to be closing.
"The markets have priced in an E.C.B.-backed bond-buying program for Spain," Mr. Spiro said. "The longer Madrid dithers, the more likely it is that the markets will turn decisively against Spain."
By STEPHEN CASTLE 18 Sep, 2012
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Source: http://www.nytimes.com/2012/09/19/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss
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