Spain sold €5.5 billion of treasury bills at an auction as its borrowing costs declined.

The Treasury said it sold €3.97 billion of 12-month bills at an average yield of 2.128 per cent, compared with 2.410 per cent at the previous auction on February 15th.

It also sold €1.53 billion of 18-month bills at 2.436 per cent, compared with 2.938 per cent in February.

Demand for the 12-month debt was 2.37 times the amount sold, up from 2.08 times in February, and the bid-to-cover for the 18-month debt was 3.51 times, down from 5.30.

The Treasury aimed to sell a maximum of €6 billion.

Spanish 10-year borrowing costs posted the biggest two-day decline since February 2nd after European leaders agreed to broaden the size and scope of the euro region's rescue facility while tightening economic cooperation and budget rules.

The 10-year yield fell to 5.211 per cent today, from 5.27 per cent yesterday and 5.427 per cent on March 11th, narrowing the gap between Spanish and German borrowing costs to 211 basis points. That gap blew out to a euro-era high of 298 basis points on November 30th, after Ireland was forced to seek a European bailout.

European leaders agreed at their summit to allow the European Financial Stability Facility to buy bonds directly from governments, while enlarging the effective capacity of the fund to its full €440 billion. They also eased the terms of emergency loans to Greece in an attempt to draw a line under the sovereign-debt crisis.

Bloomberg