Irish borrowing costs moved higher again this morning, reaching 6.024 per cent, as France and Spain sold over €12 billion of debt today, clearing a final hurdle in a big week of bond issuance in the euro zone with issues meeting strong demand.
The yield on Irish 10-year bonds was 6..024 per cent at 2.38pm, 0.1 per cent above the opening figure. The spread between Irish bonds and the benchmark German bund was 355 basis points.
The premium that investors demand to hold Irish bonds over safe-haven German bonds has widened in recent months as uncertainty over the final cost of the Government's bank bail-out plan persists.
Last week, the Government announced it would split nationalised Anglo Irish Bank into an asset recovery unit and a funding bank. However, it is still not known what this plan will cost the taxpayer, and the bond markets have seen little improvement since.
France sold €8.47 billion of debt with demand seen at the top end of the range, with the average yield falling across all three issues made by the Treasury.
About €30 billion of issuance have come to market this week, with debt from core countries such as Germany attracting solid interest, while smaller treasury note issues from Portugal suffered from the heavy supply.
But fellow periphery country Spain comfortably sold its longer dated bond issues today while yields fell sharply from the last auctions of the bonds in June, reflecting improving sentiment as the country battles to control its deficit.
Spain sold €2.7 billion worth of 10-year, 4.0 per cent coupon bonds and close to €1.3 billion worth of 30-year, 4.7 per cent coupon bonds, in line with the Treasury's target.
"It's been a tremendous success and it improves the horizon for Spain's issues heading into the final quarter. It seems that Spain is gaining more credibility in the market," said a trader with knowledge of the Treasury's sales.
The Treasury also paid much less to finance the re-issuing of the bonds from June, a moment when markets were more concerned that Spain would go the way of Greece.
The yield on the 10-year issue fell to 4.144 per cent from 4.864 per cent in June, while it eased to 5.077 per cent from 5.908 per cent on the 30-year issue.
A source also said that more than 50 per cent of the issues were sold to foreign investors, a sign of increasing confidence in Spanish debt.
The auctions followed Portugal's sale yesterday of €750 million of 12-month treasury bills, where yields rose sharply given concerns over the country's budget discipline.
The French auctions also attracted solid demand. The French treasury sold €3.15 billion of September 2012 BTANs, €1 billion of July 2013 paper and €4.313 billion of July 2015 BTANs. BTANs are bonds with two and five year maturities.
"The results were OK. Again we saw demand at the top of the range. It makes sense because in August we had both OAT and BTAN auctions cancelled ... so demand was there. All in all, it was a good result as expected of course," said Ioannis Sokos, strategist at BNP Paribas.
Average yields fell for all three French issues, compared with a previous sale.
Additional reporting: Reuters