* Treasury sells 3.5 bln of 12-mth bills, 1.2 bln of 18-mth
* Yields rise on both bills vs last auction in March
* Spain/Germany spreads 226 bps vs 214 bps before auction
(Adds details, quote)
MADRID, April 18 Spain paid substantially more
to issue 12- and 18-month Treasury bills on Monday compared with
last month as uncertainty hovered over a Portuguese bailout and
speculation intensified about Greek debt restructuring.
The sale was at the low end of the Treasury's target range
of 4.5 billion to 5.5 billion euros ($6.51 billion-$7.95
billion) and comes ahead of a closely watched long-term debt
auction on Wednesday of bonds maturing in 2021 and 2024.
Madrid paid between 64 and 93 basis points more than last
month, selling 3.5 billion euros of 12-month bills at an average
yield of 2.77 percent compared to 2.128 percent at the last
auction in March and at a bid-to-cover of 1.6, down from 2.4.
It sold 1.1 billion euros of the 18-month bills with an
average yield of 3.364 percent, up from 2.436 percent at the
last auction, and a bid-to-cover ratio of 2 after being 3.5
times subscribed in March.
Investors are turning their attention to Spain as the next
weakest link in the euro zone chain after Portugal said it would
seek aid from the European Union and the International Monetary
Fund, the third to fall after Ireland and Greece.
"Everyone was very quick to say that there were no contagion
risks bubbling out of Lisbon, but people were very rash in those
original assumptions," economist at 4Cast Jo Tomkins said.
"Liquidity is definitely dropping back due to the Easter
effect on participation in the T-bill auction. The vultures are
circling over Madrid, but I think the lions share of the market
thinks Spain will be okay."
The difference between 10-year Spanish bonos and the German
Bund stood at around 226 basis points on Monday after the
auction, up from 214 bps before the sale.
That still reflects vastly lower risk priced in than for
Greece and Portugal. The Greek/German 10-year government bond
yield spread was last 11 basis points up on the day at 1,079 bps
while the equivalent Portuguese/German spread neared 600 bps.
Many economists say Spain has distinguished itself from
Portugal, Greece and Ireland after a slew of austerity measures
and structural reforms but contagion fears remain and the T-bill
auction results suggests a sharp rise in bond yields at
The yield on the benchmark Spanish 10-year bond with a 5.5
percent coupon, to be auctioned on Wednesday, rose to 5.6
percent on Monday in the secondary market compared to an average
yield of 5.162 percent at the last time it was auctioned in
(Reporting by Paul Day, editing by Mike Peacock)