A Spanish bond auction exceeded expectations with over double its target amount of bonds selling to investors on Thursday. Spain was able to raise €10 billion ($12.7 billion) from the sale, although it originally hoped to sell half that. The Euro rose and European stock markets rose on the bond results.
Part of the sale’s success was due to demand from Spanish domestic banks, and analysts remain uncertain whether Spain will remain capable of selling its debt for very long.
While this is good news in the short-term for European bond and stock markets, Spain still maintains depression level unemployment rates, with almost 25% of Spaniards unemployed and nearly half of Spanish youth unable to find a job. The high unemployment rates are partly due to Spain’s heavy investment in construction, which was hit hard in the subprime mortgage crisis.
While the results should give European shares a brief boost, structural issues in the Spanish economy remain unsolved.
Nonetheless, good news for the Spanish bond market was echoed in Italy, where 12-month bonds fell to 2.735, at the lowest rate since June 2011. Italy is expected to offer a further €4.75 billion in bonds to investors on Friday.
