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Spanish borrowing costs nearly triple in short-term auction

Spain issued some 3-month and 6-month bills this morning – but saw its rates rocket following its bailout request.

THE COST of borrowing for Spain has continued to reach new highs – with even short-term borrowing now reaching levels which many observers would consider to be unsustainable.

An auction of short-term treasury bills this morning – the first since the country formally requested a bailout to recapitalise its banking sector – raised €3.1 billion for the government, but at significant prices.

The interest rate demanded for 3-month bills was 2.36 per cent – compared to 0.85 per cent when it issued similar bonds five weeks ago.

The rate on 6-month bills, meanwhile was 3.24 per cent – up from 1.7 per cent when a similar auction was held on May 22.

By comparison, Germany would currently pay just 2.24 per cent if it wished to borrow for a 30-year basis – with shorter-term loans commanding even lower interest.

The Federal Republic would pay less than 0.1 per cent to borrow for two years – a rate which is so small that, when inflation is taken into account, investors are effectively agreeing to lose money in exchange for a firm guarantee of its return.

Read: Moody’s downgrades 28 Spanish banks over debt concerns

More: Cyprus asks for bailout from the eurozone

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    Mute Barry O'Neill
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    Jun 26th 2012, 11:17 AM

    How long can Germany hold out with the game of chicken they are playing? Surely they realise that the game is now up and the rest of Europe cannot continue to subsidize their booming exports at the expense of their citizens. They are playing a dangerous game. I hope they don’t wait until it is too late.

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    Mute Karswell
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    Jun 26th 2012, 1:21 PM

    The current German government will try to keep their current strategy going until autumn 2013, the next German election. After that, all bets will be off..

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    Mute mel
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    Jun 26th 2012, 11:08 AM

    “Stability and jobs” isn’t that right Enda

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    Mute Karswell
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    Jun 26th 2012, 11:19 AM

    Mel – this is about Spain. Strangely enough, Enda Kenny is not a member of the Spanish government, why bring his name up here? Criticism only works if it has some tiny amount of relevance. Is Noon responsible for the crappy weather? Perhaps Adams should be credited with Irish butter being softer than that of other countries…

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    Mute Fagan's
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    Jun 26th 2012, 1:15 PM

    For all the advantages of the Euro, the fact that 5 countries in it are now bankrupt, this will probably get up to half of the countries and much of the zone’s banking system is insolvent. It is kind of a big deal.

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    Mute On de dole
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    Jun 26th 2012, 11:18 AM

    haha the costas gonna be even better dis year now dat were closer to the spanyards dan ever lol!

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