Spain debt costs fall at auction after Portugal seeks rescue

Spain sold 4.13 billion euros ($5.9 billion) of three-year bonds and its borrowing costs fell after Portugal said it would seek a European Union bailout.

Spain sold the bonds at an average yield of 3.57 per cent, compared with 3.59 per cent when it sold debt of similar maturity on March 3, the Treasury said. Demand was 1.79 times the amount offered, compared with 3.04 times on March 3, and the amount sold compared with a maximum target of 4.5 billion euros.

The debt sale, hours after Portuguese Prime Minister Jose Socrates said he would ask the European Union for financial help, was a test of investor sentiment as Goldman Sachs Group said contagion from the sovereign debt crisis would stop at Portugal. Spain, in an attempt to distance itself from other so-called peripheral nations, is implementing the deepest budget cuts in at least three decades while trying to shore up savings banks suffering a surge in bad loans.