* Treasury sell bonds due 2015, 2017, 2021
* Yields down from previous sales, remain high
* Spain raises 3.9 billion euros, beats target
By Paul Day
MADRID, Nov 22 Spain sold nearly 4 billion euros
of bonds with ease at an auction on Thursday that kicked off its
funding programme for a daunting 2013 when Madrid must shoulder
regional debt needs and will struggle to meet deficit targets.
The Treasury beat the top end of the target of 2.5-3.5
billion euros at borrowing costs that were slightly down on
previous outings of the same paper but remain too high for
The average yield on the 2021 bond was 5.517 percent,
compared with around 5.6 percent for the benchmark 10-year on
the secondary market, a long way from over 7 percent levels in
"It's a clear reflection that sentiment in Spain has
improved markedly," said bond strategist at RIA Capital Markets
"They are already funded for 2012 and the market is betting
that Spain will ask for a bailout early next year when they face
a (wall of issuance)."
Madrid faces some 28 billion euros in debt redemptions in
January while in 2013 the country's funding needs rise to 207
billion euros from 186 billion euros this year.
This could go higher still if it overshoots its deficit
target of 6.3 percent this year and 4.5 percent next year, which
the Bank of Spain warned on Wednesday was possible.
Spain sold 3.6 billion euros of a bond maturing Oct. 31,
2015, 645 million euros of a bond due July 30, 2017 and 1.5
billion euros of paper maturing April 30, 2021.
Concerned that the welfare system could slip into deficit
this year, from a balanced budget target, the economy ministry
said separately that the social security reserve fund will
subscribe a new 3.3 billion euros 5-year sovereign bond.
Madrid is also expected to help struggling regional
governments, cut out of debt markets, which could add a further
40 billion euros to its debt bill.
Spain's economy has been in recession for a year, the second
since 2009, and is not expected to return to growth until late
next year at the earliest. Some 25 percent of Spanish workers
are unemployed and deep spending cuts and tax hikes have fuelled
increasingly violent protests across the country.
However, Spain's risk premium versus Germany has fell to
around 423 basis points from above 650 bps since the European
Central Bank said it would buy up debt on the open market to
hold down interest rates for any country that signs up for aid.
Madrid has said it wants to be sure the ECB measure would
reduce financing costs, citing a spread of 200 bps as more
representative of economic fundamentals, though the central
bank's head, Mario Draghi, said he could not make such a