* Spain issues three 2014, 2015 bonds
* Yields fell compared with previous auctions
* Spain's borrowing costs have soared in euro zone debt
(Adds details, comment, background)
By Fiona Ortiz
MADRID, Oct 6 Spain's borrowing costs fell on
Thursday as it sold 4.5 billion euros of three 2014 and 2015
bonds, at the top of its target range, as European Central Bank
support on the open market eases concerns of Madrid being sucked
further into the euro zone debt crisis.
ECB buying of Spanish and Italian sovereign debt in the
secondary market has buoyed prices for those countries' bonds,
helping lower the yields they have to offer at debt auctions, as
the two countries fight off doubts about their fiscal and
"The auction was successful probably because the European
Central Bank's interventions have put a floor under bond prices
and the yields are attractive compared with French or German
bonds," Nicolas Lopez, research director at M&G brokerage in
Italy and Spain, the euro zone's third- and
fourth-largest economies, have been under the market microscope
over the last two months amid concerns they would be too big to
bail out if a worsening economic backdrop and contagion from
default-threatened Greece made their financing costs
Last week Italy paid the highest yield on a 10-year bond
since the introduction of the euro.
The average yield on Spain's April 2014 bond, in Thursday's
auction, fell to 3.589 percent from 4.813 percent at the
previous sale of the same paper. Yields on its October 2014 and
April 2015 bonds also fell.
For a table of auction results, double click on
Concern over Spain's economic situation has eased somewhat
as investors price in the likelihood the government will cut the
budget deficit to 6 percent of gross domestic product as
But uncertainty over debt levels in its 17 autonomous
regions and potential writedowns for its banks from a burst
property bubble continue to weigh, and the premium Spain pays
for benchmark 10-year debt over the German equivalent remains
near historic highs.
A three-notch downgrade of Italian debt by the ratings
agency, while largely anticipated, highlighted the contagion
risks from Greece, while talk of a plan to recapitalise European
banks and possible International Monetary Fund backing for
Spanish and Italian debt lifted the mood.
ECB purchases of Spanish and Italian have kept cash flowing
in an otherwise stagnant market, some analysts said. Data on
Monday showed the ECB bought 3.795 billion euros of bonds last
week, slightly lower than the previous week.
Under the programme, the ECB and the 17 euro zone national
central banks can buy government and corporate bonds from banks
and other investors, but not directly from governments.
(Additional reporting by Paul Day and Manuel Maria Ruiz;
Editing by Toby Chopra)