The euro strengthened against the dollar and the yen for the third day this week after Spain's bond auction drew increased demand, easing concern about Europe's debt crisis.
The euro rose against 14 of 16 of its most active counterparts as Spain raised €3.5 billion of bonds maturing in 2020 and 2041, reaching its maximum sales target.
The 30-year Spanish bond drew bids 2.45 times the amount of securities on offer, compared with 1.38 times in the previous auction in March. The Swiss franc strengthened against the euro after the nation's central bank said deflationary risks have "largely disappeared."
The euro rose 0.6 per cent to $1.2379 as of 7:10 a.m. in New York after falling to $1.2242. It strengthened to 113.06 against the yen from 112.57 yesterday. The Swiss franc appreciated to 1.3779 against the euro from 1.3924.
Spain sold €3.5 billion of bonds, the maximum amount, at yields below the prevailing market rates, and attracted bids worth as much as 2.45 times the securities on offer. € 3 billion of 4 per cent 2020 bonds at an average yield of 4.864 per cent, attracting offers worth 1.89 times the securities offered, compared with 2.03 the last time they were sold in May. It also issued €479.17 million of 4.7 per cent 2041 bonds at an average yield of 5.908 per cent with a bid-to-cover ratio of 2.45, compared with 1.38 at the previous sale of the bonds in March.
The 10-year bund yield rose one basis point to 2.69 per cent as of 12:16 p.m. in London. The 3 per cent security due July 2020 fell 0.2, or €1.2 per 1,000-euro face amount, to 102.72.
Spanish 10-year note yields dropped six basis points to 4.87 per cent. The premium that investors
demand to hold Spanish 10-year bonds over benchmark bunds narrowed by eight basis points to 213 basis points.
The yields on other so-called peripheral euro-region bonds also fell versus bunds. The Portuguese-German 10-year yield spread narrowed three basis points to 291 basis points, while the Greek spread narrowed one basis point to 666 basis points.
The Irish-German spread widened three basis points to 293 basis points.
Meanwhile, Spain announced that it will publish stress tests on the nation's financial institutions after Francisco Gonzalez, chairman of Banco Bilbao Vizcaya Argentaria SA, Spain's second-largest bank, said on June 14 that capital markets were closed to most Spanish companies and banks.
The Bank of Spain will make the findings public to give investors more information on the state of the
banks, Miguel Angel Fernandez Ordonez, the central bank governor, said in a speech yesterday.
EU leaders are meeting in Brussels to discuss the region's economies and the so-called stability and growth pact.
REUTERS