Spain's Treasury raised 5.2 billion euros ($6.37 billion) at its 12- and 18-month T-bill auction on Tuesday, but the substantial premium to the same auction a month earlier raised doubts over the country's credit rating.
The 12-month bill paid an average yield of 2.303 percent compared to 1.59 percent in the same auction in May, while the 18-month gave 2.837 percent, up from 1.951 percent.
"The bid/cover was respectable and they managed to get the bonds away. But this was hardly a success with about 5.2 billion euros sold, at the bottom end of the target," said bond strategist at Monument Securities in London Marc Ostwald.
"It also begs the question how Moody's can rate Spain triple-A when you have an auction result like this. While Spanish 12-month yield was 2.30 percent, France's equivalent is 0.4 percent and below the ECB's policy rate of 1.0 percent. This must now put pressure on Moody's to downgrade Spain."
Moody's has kept Spain's debt rating at its highest level, while Fitch last month cut to one notch below top and S&P's has Spanish sovereign debt at two steps below its highest rating.
On Thursday, the government hopes to raise up to 3.5 billion euros through a 10- and 30-year bond issue.
"(This) comes ahead of the more significant - in terms of Madrid's ability to raise cash on the open market - 10- and 30- year sale on Thursday," 4Cast said in an investors note.
Spain must redeem 16.2 billion euros in bonds by the end of July, a payoff the government has said it will have no problem meeting.
The spread of Spain's 10-year bonds stood at 214 basis points at 0847 GMT from the German 10-year bund after opening at 211 basis points.
The spread jumped on Monday after Spain's treasury secretary and a banking leader said the liquidity freeze Spain is facing on foreign markets is a problem.
On Tuesday, El Pais newspaper reported the government has asked the European Commission to make results of a European bank stress test public as Madrid fights daily speculation it is preparing to seek aid from the EU.
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