Spain sold 4.13 billion euros ($5.9 billion) of three-year bonds and its borrowing costs fell after Portugal said it would seek a European Union bailout.
Spain sold the bonds at an average yield of 3.568 percent, compared with 3.592 percent when it sold debt of similar maturity on March 3, the Treasury said. Demand was 1.79 times the amount offered, compared with 3.04 times on March 3, and the amount sold compared with a maximum target of 4.5 billion euros.
The debt sale, hours after Portuguese Prime Minister Jose Socrates said he would ask the European Union for financial help, was a test of investor sentiment as Goldman Sachs Group Inc. said contagion from the sovereign debt crisis would stop at Portugal. Spain, in an attempt to distance itself from other so- called peripheral nations, is implementing the deepest budget cuts in at least three decades while trying to shore up savings banks suffering a surge in bad loans.
"The fact that Portugal seeks help early reduces contagion risk," Mohit Kumar, a fixed-income strategist at Deutsche Bank AG in London, said by telephone. "The bonds have performed very well; any decline in Spanish bonds in the near-term is likely to come from their rich valuation rather than contagion concern."
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