Spain and Italy have been able to attract sufficient buyers for their bond sales prompting belief that the European sovereign debt crisis has eased, this was however at an increased price.
The relatively successful multibillion-euro auctions pushed the currency 1.8 percent higher against the United States dollar to $1.336 and sent European bourses rallying. The Ibex index of the most traded shares of Spain rose 2.7 percent with Santander up 4.8 percent. Spain sold €3bn of five-year bonds (twice oversubscribed) but was forced to pay 4.5 percent, which was nearly a full percentage point more than at the November auction but still less than expectations. Italy, on the other hand, auctioned €6bn of five- and 15-year bonds.
Spain and Italy, along with Portugal, have been standing tall against scepticism of investors over their finances and took advantage from the stronger support given by EU officials a few weeks ago. The European Union has been widely criticized for doing neglible and too late in the debt crisis that lasted almost the entire last year and escalated panic in the market that ultimately tipped Greece and Ireland into a bailout.
The European Union, in the meanwhile, has stepped up its defence of the single currency and even agreed to bolster its €440bn emergency funds package that investors think is not good enough to rescue a big country like Italy or Spain.
The investors also expressed fears that the sale of bonds may only have gone through due to ECB and China's support while analysts believe that stringent budget cuts may put countries such as Spain and Portugal back into recession.