EURO GOVT-Spanish yields, Bunds fall after Spain T-bill sale

LONDON, June 19 (Reuters) - Spanish government bond yields fell and German Bund futures hit session lows on Tuesday after a sale of Spanish bills generated decent demand although borrowing costs soared.

Spanish 10-year government bond yields were 9 basis points lower on the day at 7.10 percent, compared to being little changed ahead of the sale.

September Bund futures hit a session low of 142.17, 47 ticks lower on the day after a volatile start to the session.

Spain sold just over 3 billion euros of 12- and 18-month paper.

"They payed up quite heavily to do the one year but managed to do slightly over their target which as far as Spain goes is deemed to be a positive," a trader said.

"But we're not seeing anyone coming in and buying bonds on the back of it."

A bigger test of sentiment will come on Thursday when Spain sells up to 2 billion euros of bonds with maturities up to five years.