Spain cheered by high demand for new 10-year bond

Spanish Economy Minister Luis de Guindos said exceptional demand for a new Spanish 10-year bond Tuesday showed there was renewed confidence in the country's economy.

De Guindos said that by midday demand for the bond had reached (EURO)24 billion ($32 billion) - something, he told reporters in Brussels, that "has never been seen in the history of the Treasury."

The Treasury has yet to disclose how much of the bond it will sell.

Spain's borrowing costs have dropped sharply over the past few months after the European Central Bank offered to buy up short-term bonds of those countries struggling with their debts if they apply for aid and submit to an economic reform program. Spain hasn't applied but the possibility that it could - and thereby get ECB help - has shored up the country's bond prices.

On the secondary market, the benchmark rate for Spain's 10-year bonds was down 0.06 percentage points at 5.08 percent. A few months ago, they were trading over 2 percentage points higher and around the levels that prompted other countries, such as Greece and Portugal, to seek an international bailout.

Earlier, Spain also sold (EURO)2.8 billion ($3.7 billion) in short-term bills with interest rates falling sharply. The amount raised was more than target and provided further evidence that investors are growing less concerned over the country's economic future.

The Treasury said it sold (EURO)1.21 billion in three-month bills at an average interest rate of 0.44 percent, down from 1.19 percent in the last such auction Dec. 18. And it sold (EURO)1.58 billion in six-month bills at 0.88 percent, compared with 1.61 percent last month.

It was Spain's fourth successful bond sale of the year.