Spain succeeded in raising nearly four billion euros at lower rates in a key bond auction on Thursday, seen as a significant feat in the midst of the eurozone debt storm.
The sale showed Spain was able to get market financing at manageable, albeit expensive, terms -- far better than those the market offered Italy just two days earlier.
The European Central Bank has boosted the market by buying Italian and Spanish government bonds since a summer panic broke out over the debts of the eurozone's third- and fourth-biggest economies.
Spain raised 3.95 billion euros ($5.4 billion) in the auction of eight- and nine-year bonds, the Bank of Spain said in a statement.
Demand outstripped supply by about two-to-one, it said.
The demand for the issue was a positive sign, especially when compared to the weak reception for an Italian bond issue on Tuesday, said Soledad Pellon, analyst at brokerage IG Markets.
"The yields Spain is paying are far from ideal, even more so when we take into account that the ECB has been making massive purchases of Spanish bonds on the secondary markets," Pellon said.
"This should have eased the pressure on our country much more," the analyst added.
"Nevertheless, the auction went relatively well if we take into account the highly uncertain context now."
Markets are beset by worries that Greece will default on its massive debts and drive cracks into the 12-year-old eurozone.
French President Nicolas Sarkozy and German Chancellor Angela Merkel backed Greece after a telephone conference Wednesday with Greece's Prime Minister George Papandreou.
Sarkozy and Merkel issued a statement insisting that they "are convinced that the future of Greece is in the eurozone."
But doubts remained over whether Europe can overcome the stubborn, unfolding crisis.
US Treasury Secretary Timothy Geithner said Europe's leaders recognize that they will have to do more to beat the crisis. "They recognize they have been behind the curve," he said Wednesday.
A breakdown of the latest Spanish bond sale showed investors demanded the following yields:
- 4.969 percent for 1.022 billion euros in eight-year bonds;
- 5.006 percent for 1.396 billion euros in an issue of nine-year bonds;
- 5.156 percent for a second issue of 1.532 billion euros in nine-year bonds.
The rates were significantly lower than the 5.896 percent the Spanish government was obliged to pay in a 10-year bond auction on July 21. Spanish 10-year government bonds were trading at 5.388 percent shortly before the auction.
Italy had to pay yields of 5.60 percent for shorter-dated five-year bonds and 5.59 percent for seven-year bonds in a government bond auction Tuesday, a sign that it has become a bigger source of market concern than Spain.
Spain has promised to reduce its annual public deficit from the equivalent of 9.2 percent of gross domestic product last year to 6.0 percent of GDP this year, 4.0 percent in 2012 and 3.0 percent in 2013.
Doubts linger over its capacity to reach those goals because of the slow pace of economic growth, an unemployment rate of more than 20 percent and stubborn deficits in the semi-autonomous Spanish regions.