Spain's borrowing costs plunged Tuesday as it raised 2.785 billion euros ($3.7 billion) in an auction of three- and six-month bills, the latest sign of improved investor sentiment towards the recession-hit country.
The Treasury sold 1.206 billion euros in three-month bills with an average yield of 0.441 percent, down from 1.195 percent from the last similar auction held on December 18, the central bank said in a statement.
It raised another 1.579 billion euros through the sale of six-month bills at an average yield of 0.888 percent, down from 1.609 percent at the previous comparable auction on December 18.
Spain's borrowing costs have fallen since the European Central Bank announced in September its readiness to buy an unlimited sum of bonds to curb borrowing costs for troubled member states that accept strict conditions.
The risk premium -- the extra rate demanded by investors in Spanish 10-year bonds over the rate offered by equivalent German bonds -- amounted to 353 basis points.
The Spanish risk premium has eased dramatically since reaching more than 600 basis points in mid-2012 when Spanish bond yields shot above 7.0 percent.
Falling borrowing costs have eased pressure on the government of the eurozone's fourth-biggest economy to seek European help to finance its debts.
In Tuesday's debt auction, demand for the Spanish debt securities outstripped supply by nearly four to one.
The Spanish government had set a target of raising between 1.5 billion and 2.5 billion euros in the auction.
The Treasury estimates its gross financing needs at 215-230 billion euros in 2013, after borrowing a total 249.6 billion euros in 2012.