Spain sold €4.6 billion of bills, just above the maximum target, and its borrowing costs fell at the first auction since the European Central Bank proposed buying the debt of cash-strapped nations.

Spain sold 12-month bills at 2.835 per cent, compared with 3.07 per cent when they were last auctioned on August 21st, and 18- month bills at 3.072 per cent, compared with 3.335 per cent.

The Madrid-based Treasury, which plans to sell another €4.5 billion of bonds on September 20, said demand for the 12-month bills was 2.03 times the amount sold, compared with 1.91 last month, and 3.56 for the longer-dated bills, compared with 3.98.

Borrowing costs fell from the previous auction even as the impact of ECB president Mario Draghi's proposal to buy bonds of countries that submit to rescue programs started to fade.

Spanish prime minister Mariano Rajoy has delayed making a decision on whether to trigger the mechanism that Mr Draghi announced two weeks ago, prompting an increase in 10-year yields yesterday to more than 6 per cent.

The extra yield on Spanish benchmark 10-year bonds compared with German equivalents narrowed to 426 basis points at 10.45 am in Madrid, compared with 440 basis points before the auction and 430 basis points yesterday.

On September 20th, Spain will sell its benchmark 10-year bond, maturing in January 2022 and securities due in October 2015.

The Treasury said September 6th it had sold 76.8 per cent of the medium-and long-term debt it plans to sell this year. It hasn't given data on the progress of bill sales.

Bloomberg