RATES UP: Spain’s borrowing costs soared in a pair of short-term auctions Tuesday as investors worried that the country would not be able to manage an expensive rescue of its ailing banking sector.
THE DETAILS: The Treasury auctioned €3.1 billion ($3.9 billion), just above its target range. But the cost was high— an indication that investors are concerned that the Spanish government will be stuck with huge expenses after a European bailout of its fragile banking system. The interest rate on 3-month bills was 2.36 percent, nearly triple the 0.85 percent paid in the last such auction on May 22. The rate on the 6-month bills was 3.24 percent, up from 1.7 percent paid in May.
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THE OUTLOOK: Spain is battling to slash its deficit, which was 8.5 percent last year, to the European Union limit of 3 percent of GDP by 2013.
