Interest rates: Spain sees them go lower despite downgrade

Interest rates fell on Spain's latest debt auction, a sign of confidence in the nation. Interest rates for its 18-month bills fell from last month's 2.93 percent to this month's 2.50 percent.

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    The Bank of Spain is seen behind a sign in Madrid March 10, 2011. Spanish Moody's downgraded Spain's sovereign debt rating by one notch on Thursday and warned of further cuts to come due to fears that bank restructuring will cost more than twice what the government expects. Despite this, Spain was able to sell its debt to investors at reduced interest rates this week.
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Spain has raised €5.5 billion ($7.67 billion) in a sale of 12- and 18-month bills, with lower interest rates reflecting investor confidence despite last week's downgrade by Moody's rating agency.

The Treasury said it sold €3.9 billion in 12-month bills at an average interest rate of 2.17 percent, down from 2.41 percent at the last such auction Feb. 15.

It sold €1.5 billion in 18-month bills with the yield down to 2.50 percent from 2.93 percent last month.

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The 12-month auction was about two times oversubscribed while demand for the 18-month bills was more than triple that on offer.

The auction was the first since Moody's reduced Spain's rating by one notch to Aa2 citing worries over the country's grim economic prospects.

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