MADRID, Sept 17 (Reuters) - Spain will attempt to step up its borrowing at a bond auction on Thursday, seeking to take advantage of investor bets on an imminent ECB bond-buying programme that would support the market value of its debt.
The Treasury said on Monday it would auction between 3.5 billion euros and 4.5 billion euros ($4.6 billion and $5.9 billion) of 12- and 18-month T-bills on Tuesday and the same amount in bonds later in the week.
Spain has not attempted to raise more than 3.5 billion euros from a bond sale since early March when the market was flush with cheap credit from the European Central Bank’s long-term refinancing operations (LTROs).
The auction on Thursday includes a new bond maturing Oct. 31, 2015, with a 3.75 percent coupon and the reopening of the benchmark 10-year bond, maturing Jan. 31, 2022, with a 5.85 percent coupon.
The ECB’s announcement that it would buy sovereign debt on the secondary market if a country asked for European aid has brought down Spanish risk premiums to levels not seen since April.
However, Prime Minister Mariano Rajoy’s reticence about making such an application pushed yields on 10-year debt up by nearly 6 percent on Monday.
“Rajoy saying last week that, since the spread has fallen, maybe a bailout wasn’t needed, has not been taken very well by the market. The spread improved because everyone expects him to apply for aid,” a Madrid-based trader said.
“If he doesn’t do it, the money starts to leave the country again.”
Spain is the centre of the euro zone debt crisis, caught in a prolonged recession with almost 6 million unemployed draining social security funds as they search for work.
Rajoy has passed austerity measures worth almost 10 percent of gross domestic product up to end-2014 and may be obliged by European partners to do more if he applies for a bailout, a prerequisite for the ECB to buy its bonds.