The Bank of Spain announced that the Treasury had sold €6 billion, or $7.8 billion, of bonds, far above the €3.5 billion it had set as the maximum target for the auction.
The sale included €2.2 billion of 10-year bonds, priced to yield 5.24 percent, down from the 5.43 percent it paid to sell similar securities on Oct. 20.
The yield for 10-year bonds of another beleaguered euro zone member, Italy, fell 0.22 percentage point, to 6.514 percent, in the open market even after the government called a confidence vote for Friday on a new austerity package.
Analysts said the European Central Bank’s new medium-term bank financing program
, which gets under way next week, was already helping to buoy euro zone debt.
The E.C.B. last week said it would start providing banks loans for three years, compared with a previous maximum of about one year. It also cut its benchmark interest rate target to 1 percent from 1.25 percent.
“Without a doubt it’s helping to generate support,” said Charles Diebel, head of market strategy at Lloyds Banking Group in London. “I don’t think it was really Spain-specific.”
Mr. Diebel said banks were taking advantage of low borrowing costs to take advantage of the so-called carry trade.
“If you can get funding from the E.C.B. at 1 percent and buy bonds from the Spanish government at 5.4 percent, that carries pretty well for three years,” he said. “You’re earning 440 basis points,” or 4.4 percentage points.
Steven Saywell, head of global currency strategy in London for the French bank BNP Paribas, said, “to really turn things around, we’re going to need more aggressive action from the E.C.B. I don’t think this is a turning point.”
Indeed, Mario Draghi, the president of the European Central Bank, again ruled out more aggressive sovereign bond purchases by the central bank, saying during a speech in Berlin that the euro zone’s “firewall” was the bailout fund set up by European governments.
He also indicated that struggling governments in Europe would in the end have to solve their own problems.
“There is no external savior for a country that doesn’t want to save itself,” he told the audience in Berlin, The Associated Press reported.
That idea was reinforced Wednesday by Ben S. Bernanke, the U.S. Federal Reserve chairman, who told senators at a meeting behind closed doors in Washington that the Fed was not planning to ride to the rescue of the embattled euro, news agencies reported.
The euro ticked back above $1.30 during trading Thursday, from an 11-month low of $1.2946 during trading Wednesday. European stocks rose as well.
But Mr. Saywell predicted the euro would remain weak in the near term, with selling driven both by fears of a breakup of the currency union as well as more prosaic concerns about the economic outlook, with the European economy now widely expected to be mired in recession for at least part of next year.
A survey of euro zone purchasing managers showed both the services and manufacturing sectors continuing to contract for a fourth straight month in December. Markit Economics said Thursday that its composite index rose to 47.9 from 47 in November, but still signaled a contraction. A reading above 50 indicates an expansion.
Further weighing on the euro, Mr. Saywell said, was the E.C.B.’s rate cut, which had the effect of narrowing the advantage money market managers gain by holding euro-denominated assets and making dollars relatively more attractive.
This article has been revised to reflect the following correction:
Correction: December 15, 2011
An earlier version of this article gave a wrong date for when the European Central Bank’s new medium-term bank financing program, announced last week, goes into effect. It is next week, not Thursday.
Article source: http://www.nytimes.com/2011/12/16/business/global/strong-bond-sale-in-spain-and-russian-support-fail-to-lift-euro.html?partner=rss&emc=rss