Spain to reduce bond issuance

Spain will issue less debt than expected in its remaining auction this year amid an increase in borrowing costs, although not named any scheduled sale, the finance minister, Elena Salgado, said.

"We have a commitment to investors, so it will not halt any planned auction at the end of the year here," he told a press conference following the weekly cabinet meeting today in Madrid. "As we have more than sufficient margin, probably slightly reduce the volume in each of these issues."

Spain plans to sell three-year debt on December 2 and 10 - and 15-year securities on December 16, according to the Treasury. Budgetary outcomes have been better than expected, ie the government's borrowing needs are "covered", said Salgado.

The extra yield investors demand to Spanish control 10-year Treasury bonds rather than German, the European benchmark, rose to the highest since the creation of the euro today as the Irish call for rescue prompted speculation that Portugal and Spain may also seek outside help.

Spain reduced its central government budget deficit by almost half in the first 10 months of the year, after cutting public salaries and raise taxes in an attempt to curb the deficit in the third largest in the euro area public.

Salgado also said Spain's net financing needs for next year are 45 million euros ($ 59,600,000,000) and debt repayments are made to coincide with periods of higher tax revenues. The interest amounted to 2.2 percent of gross domestic product this year, Salgado said it was "one of the lowest in the euro area."

Surge Performance

Spain 10-year bond yields rose as high as 5,284 percent today, pushing the spread over German debt to 264 basis points. The yield fell to 5.17 percent after the announcement of the bond auctions.

Spain is trying to distance itself from other so-called peripheral countries through contagion from the financial and fiscal crisis in Ireland. Spanish Prime Minister José Luis Rodríguez Zapatero, "absolutely" ruled out the need for an international rescue his country today, said Salgado "no need" to talk about aid to Portugal either. Spain has a "stable" base of investors, while Asian investors increased their holdings of Spanish debt, he said.

The risk for Europe is that Spain's economy is twice as large as that of Greece, Ireland and Portugal combined, which means that if Spain did not need help, which could slow the region euro rescue fund of 750 million euros. Bundesbank President Axel Weber said Nov. 24 that if the fund is not enough to calm markets, "will have to be increased."

Bank Transparency

Bank of Spain Javier Ariztegui deputy, said the central bank will require more data from lenders in real estate holdings and financial status of their bulk. The new disclosures should be ready in late March, said in a speech today in Barcelona. Stress tests, published in July still "adequately describe the current situation of the banking system and its risks," he said.

Spanish lenders with 181 million euros of "exposure" care "of construction and real estate, according to the Bank of Spain, after a property boom collapsed a decade, prompting a wave of bad loans.

As part of the same unit to gain credibility by providing more information for investors, the government said Nov. 24 that the regional governments to begin the first publication of the harmonized budget data each quarter. Regions such as Catalonia and Andalusia, plus manage the central government and employ half of all public employees, making spending plans crucial to the nation's finances.

Spain has pledged to reduce its overall budget deficit of 9.3 percent of gross domestic product this year from 11 percent in 2009. cuts in public wages, pension freeze and reductions in infrastructure spending will help boost the deficit of 6 percent in 2011. Salgado said the government will take further action if any "deviation" of the targets.