Madrid places 2,8 billion euros of bonds, but yields rise above 5%

The indications coming from today's auction of Spanish government bonds are not comforting, with the yield differential widening by 20 basis points. Apparently, the auctions went well for 2019 maturing securities with a bid-to-cover of 2,13, and for 2026 maturing securities with a 2,57 bid-to-cover, however, despite the yields offered, the treasury managed to place 1,5 billion euros of securities maturing in 2026, while the market was expecting between 1,75 and 2 billion. The problem is that today Spain's borrowing costs – bond yields have risen above the 5% that markets believe the state can plausibly repay – are well above the country's nominal growth levels. So far Spain has not had any serious problems in placing its debt, but the risk of contagion from some of the weaker EU countries is there. Also due to the government's efforts in recent months to reduce the budget deficit, now at 11,2% of GDP, in a particularly sluggish economic climate.