* Treasury beats targeted range
* Demand stronger on 18-month T-bill
MADRID Nov 20 Spain easily beat its volume
target at Tuesday's short-term debt auction but yields remained
high as investors eye a triple-bond sale on Thursday that kicks
off the Treasury's 2013 funding programme.
Spain sold 4.9 billion euros ($6.3 billion) of 12- and
18-month T-bills compared to a target range of 3.5 billion to
4.5 billion euros.
The average yield on the 12-month bill was 2.797 percent,
compared with 2.823 percent at auction last month, and it was
3.034 percent on the 18-month paper, up from 3.022 percent in
Investors are demanding historically high premiums from
Madrid as the government struggles to reduce a high budget
deficit while tax revenue falls in a prolonged recession.
"This was a pretty strong showing, at the upper end of the
expected range, and the levels looked good. Looking forward to
the bonds on Thursday, these auctions are generally well
supported at the moment," said Simon Peck, analyst at RBS.
Spanish debt yields have fallen since euro-era highs in July
after the European Central Bank announced a plan to buy
sovereign paper on the secondary market of any country which
applies for European aid.
While Madrid has so far refrained from applying for aid, the
threat of ECB intervention has kept the premium investors demand
for Spanish benchmark 10-year bonds over German debt at around
450 basis points compared to over 650 bps in July.
Tuesday's auction comes ahead of the sale of bonds maturing
in 2015, 2017 and 2021 on Thursday. The Treasury met its 2012
gross issuance target after an auction Nov. 8, and is using the
remaining three scheduled debt sales to raise funds ahead of a
Next year, the central government has gross issuance needs
of 207 billion euros, up from 186 billion euros for this year.
However, with the 17 regional governments virtually shut out
of debt markets, they are likely to call on Madrid for funding,
inflating financing need estimates to around 250 billion euros.
On Tuesday, the Treasury sold 4.2 billion euros of a
12-month bill and 713 million euros of an 18-month bill.
Together they beat the target to issue 3.5 billion to 4.5
The 18-month bill saw the strongest demand, with a
bid-to-cover ratio of 5.7 after 3.0 at the last auction, while
the 12-month bill was 2.1 times subscribed after 2.7 times in