Yields jump less than expected at Spanish bond sale

* Bid-cover ratio rises to 2.3 at 3-year bond sale

* Yield jumps 1.2 percentage points from last 3-year sale

* Lower amount sold helped auction

MADRID, Dec 2 (BestGrowthStock) – Yields were lower than expected at
Spain’s auction of three-year bonds on Thursday, although
concerns it may be next in Europe’s debt crisis drove up its
risk premium 1.2 percentage points from the last sale in
October.

Analysts and bond market players had predicted a leap of as
much as 2 percentage points in yields, but Madrid’s situation
has been helped by mounting expectations the European Central
Bank will step up extraordinary measures to contain the crisis.

The Treasury had cut the amount of bonds on offer in order
to trim financing costs as it faces down market doubts on
whether it can bring down its deficit due to sluggish economic
growth and persistent concerns it might need to bailout its
debt-laden banks.

Analysts said the lower amount sold helped firm demand at a
time of market fears that Spain could follow Greece and Ireland,
and possibly Portugal, into needing emergency funds.

“This showed there’s still a big part of the market that
continues to think these pressures that are out there have no
foundation. There’s a block out there that doesn’t believe the
euro is collapsing,” said a Madrid-based trader.

The ECB meeting scheduled for later on Thursday gave a lot
of support to prices, analysts said. [ID:nLDE6B10JF]

“Speculation running high that the ECB will find ‘something’
to calm down market jitters in the press conference later on
obviously helped Spanish government bonds to make up some of the
lost ground,” said David Schnautz, strategist at Commerzbank in
London.

The bid-cover ratio in the auction was 2.3, compared with
2.2 at the last auction, on Oct. 7, and the average yield was
3.717 percent, up from 2.527 percent two months ago
[ID:nMDT009552]

The risk premium on Spanish benchmark 10-year bonds
(ES10YT=TWEB: ) over the German benchmark (DE10YT=TWEB: ) narrowed
on Thursday to about 240 basis points, in a second day of bond
buying after soaring to a euro era high of over 300 basis points
on Tuesday.

(Editing by Patrick Graham)

Yields jump less than expected at Spanish bond sale