Spain sees good demand, higher rate in bond sale

MADRID (AP) - Spain easily raised 3 billion ($3.9 billion) on Thursday in a debt auction that was a key test of investor confidence, the day after a successful bond sale in Portugal eased market pressures somewhat.

Demand was strong, with bids worth 2.1 times the amount on offer. However, the average yield on the 5-year bonds was up to 4.54 percent compared with 3.58 percent at the last such auction on Nov. 4. Then, the sale was only 1.6 times oversubscribed.

Spain had hoped to raise between 2 billion and 3 billion on Thursday.

The sale came a day after Portugal, which many fear might be the next in line to need a bailout after Greece and Ireland, saw good demand for its debt auction.

Spain's main stock index closed 5 percent higher Wednesday evening and was up another 2 percent on Thursday shortly after the bond auction figures came out.

The government insists neither Portugal nor itself need a bailout, thanks to austerity measures and reforms designed to shore up their ailing public finances.

The Spanish government says the country is not like Greece or Ireland, noting its overall debt level as a percentage of GDP is 20 percentage points below the EU average.

Still, investors fear that contagion from the European debt crisis will push Spain's borrowing costs up. A bailout of Madrid could be devastating for the eurozone because Spain is about five times larger than either Greece or Ireland and would test the bloc's financial strength.