Spain faces jittery debt markets while Portugal calms nerves after auction (Reuters) (13-01-2011)

MADRID - Spain is about to pay a premium to sell up to 3 billion euros of 5-year bonds on Thursday as it faces jittery debt markets for the first time in 2011. However, Portugal achieved a successful offer calming that way nerves.

Spanish yields in the secondary market suggested investors would demand around 4.8 percent to buy the debt at auction. that would be higher than an average yield of 3.576 percent at Spain's last 5-year auction on Nov. 4, when it sold 3.4 billion euros of the bonds. After the November sale, it said it would reduce the size of offers at subsequent auctions.

In 2011, Spain plans to issue a net 47.3 billion euros in medium- and long-term debt, down from 62.1 billion in 2010. It tackles redemption hurdles in April, July and October, giving it elbow room in the first few months of the year.

Portugal sold 1.25 billion euros of bonds on Wednesday, the maximum amount it had targeted while the borrowing cost fell to 6.716 on the key 10-year maturity.

Lisbon's auction was the first major test of investor sentiment on whether Portugal, Spain and Italy can fund their huge debt piles at sustainable levels.

Following data, Portugal is a lot possible to become the third euro zone state after Greece and Ireland to ask for an EU-IMF bailout in less than a year. Paying investors returns of 7 percent or more is seen as unsustainable.

Source: Reuters