Spain sees solid demand for 3 medium-term bonds

 Spain saw solid demand for 3 medium-term bonds on Thursday, selling 4.1 billion euros ($5.4 billion) of the paper, just above the targeted range, but with some pressure on yields as support from cheap cash from the European Central Bank waned.

    Investors may have also been pushing for a premium as talks on the second Greek bailout faltered.

    Spain sold 2.3 billion euros of a bond maturing July. 30, 2015 at an average yield of 3.322 percent compared to 2.861 percent paid at the last primary auction on Feb. 2.

    The bond was 2.2 times subscribed, compared to 1.6 times earlier in the month.

    The Treasury shifted 733 million euros of the other 2015 issue, maturing Jan. 31, at an average yield of 2.966 percent and a bid-to-cover ratio of 4.4, and 1.1 billion euros of a bond maturing Oct. 31, 2019 with a 4.832 percent yield and 3.3 times subscribed.

    The Jan. 2015 bond last sold on the primary market August, 2011 and the longer dated issue was last sold in October of last year. Yields were down on both from last year.

    The treasury has benefited from the ECB's long-term refinancing operations (LTRO) which flooded markets with almost a half a trillion euros of cheap three-year cash in December and will provide more of the same at the end of this month.

    Earlier, official data showed Spain's economy shrank for the first time in two years, weighed down by weak domestic demand and faltering exports as its main trading partners own economies stumble.

 Spain saw solid demand for medium- and long-term bonds, paying over 2 percentage points less to issue a 5-year bond than Italy this week, easing concerns it was the euro zone’s weakest link. Italy had to pay a record 6.47 percent on 5-year bonds, offering little relief to investors in the region.

Italy’s main employers’ lobby, Confindustria said Italy is already in recession and will not emerge from it until the third quarter of 2013, Confindustria said.

“There is still a lot of uncertainty surrounding Europe and that is worrying investors,” said Ken Hasegawa, commodity derivatives manager at Newedge Brokerage in Tokyo.

Signs of weakness in the global economy are also upsetting investors. China’s factory output shrank again in December, a preliminary purchasing managers’ survey showed, reinforcing concerns that manufacturers face waning global demand and tight domestic credit.