Spain sold more bonds than expected at auction today and at record low yields as investor appetite for euro zone peripheral debt outweighed any concern over this week's European elections.

The Treasury sold €3.53 billion of five- and 10-year bonds, slightly above the top end of the target range though demand was lower than a previous auction of the two bills just a month earlier.

After more than four years of a euro zone debt crisis, the European Parliament elections, which began today, are expected to show many voters migrating to anti-European and anti-austerity parties fueling concerns of political instability in the region.

Lower liquidity also played a role in Spain’s auction ahead of a bank holiday weekend in big financial centre Britain and after the issuance of €5 billion of Spanish inflation-linked bonds and €14.25 billion of Italian debt last week.

"There seems to be some pressure on euro zone peripheral debt at the moment. The European election is looming but also investors are struggling to make up their mind as to whether this great run of improving spreads and yields in the last year and a half has come to an end, especially after last week's sell off," said Michael Leister, strategist at Commerzbank.

Spain’s benchmark debt yields have fallen to record lows in recent months after almost two years of declining financing costs but jumped this week to their highest level since mid-April.

Demand for Spain’s two bonds was well balanced, with the Treasury selling slightly more of the 10-year bond than the five-year paper.

Yields on the 10-year dropped below 3 per cent for the first time, with average yield at 2.968 per cent, while the five-year bond sold for 1.648 per cent.

The Treasury had sold almost 54 per cent of its total end-of-year medium and long-term debt target following the auction. (Reuters)