MADRID – Spain raised €4.6 billion ($6 billion) at a sharply lower cost Thursday amid growing expectations that the cash-strapped country will soon make a request for international help to deal with its finances.
The Treasury sold €1.51 billion in 10-year bonds at an average interest rate of 5.46 percent, down from 5.66 percent in the last such auction Sept. 20. It also sold €1.46 billion in five-year bonds at 3.98 percent, down from 4.60 percent, and €1.64 billion worth of three-year bonds at 3.23 percent, which was below last time's 3.68 percent.
Demand was more than twice the amount offered.
Spain says it will soon decide whether to look to tap a European Central Bank bond-buying program largely designed to keep a lid on its borrowing costs.
As well as borrowing too much, the country has nearly 25 percent unemployment and is in its second recession in three years. Its regional governments are also heavily in debt while many of its banks have incurred heavy losses after a property sector crash in 2008.
On Thursday, the Bank of Spain said the amount of loans in Spanish banks that are at risk of not being paid rose to a record €179 billion in August, representing 10.51 percent of the loan total. In July, the rate was 9.86 percent.
The 16 other countries that use the euro have agreed to provide Spain with up to €100 billion to help support its troubled banks. Spain estimates the banks will need only some €40 billion.
Spain is one of the key focal points in Europe's financial crisis given that, as the fourth largest economy in the eurozone, it would be hugely expensive to rescue.
The government has introduced austerity measures and financial and labor reforms in a bid to convince investors it is getting a grip on its finances. The measures have led to many strikes and protests. Labor unions are expected to announce the country's second general strike in a year on Friday with Spanish media saying the date will likely be Nov. 14.