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Eurozone crisis: Spain's borrowing costs fall

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Eurozone crisis: Spain's borrowing costs fall

Spain’s short term borrowing costs tumbled on Tuesday as it raised 4.51 billion euros, on hopes that the European Central Bank will soon start buying its bonds.

According to figures from the Bank of Spain, the 12 month rate slumped to 3.070 percent from 3.918 and the 18 month rate dropped to 3.335 percent from 4.242 percent in July.

Demand outweighed supply by more than two-to-one, allowing the Treasury to raise more than its target range of 3.5-4.5 billion euros.

This year Spain’s borrowing costs have climbed to danger levels, despite tens of millions of euros in spending cuts to reign in a bulging public deficit, prompting speculation that it will need a full bailout.

The eurozone has already agreed to extend a rescue of 100 billion euros in order to secure Spain’s staggering banks.

Last week, Spanish Prime Minister Mariano Rajoy said he would consider asking the ECB to buy Spanish bonds, depending on the conditions attached.

“If it seems reasonable, we will do it,” Mr Rajoy said.

The ECB’s Draghi raised hopes on July 26 when he promised that European Central Bank was ready to do “whatever it takes” to preserve the euro.

 These hopes eased somewhat when he later said the bank “may” resume bond purchases, however even the possibility of action has been enough to support the market so far.


Tags assigned to this article:
DraghiECBEurozone CrisisSpain borrowing cost

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