Spain Borrowing Costs Rise as Moody’s Decision Looms - BusinessWeek

Spain Borrowing Costs Rise as Moody’s Decision Looms - BusinessWeek: "Spain auctioned 3 billion euros ($4 billion) of Treasury bills at rising borrowing costs as a decision by Moody’s Investors Service on lowering the country’s credit rating looms.
Spain sold 1.17 billion euros of three-month bills at an average yield of 0.685 percent, compared with 0.624 percent at the last auction on Aug. 24. It sold 1.81 billion euros of six- month bills at a yield of 1.18 percent, compared with 1.037 percent in August, the Bank of Spain said. It had set a maximum target for the auction of 3.5 billion euros.
Moody’s said on June 30 it may cut Spain’s Aaa rating when it completes a review within three months. The government is also due to announce its borrowing plan for 2011 on Sept. 30 as it presents to parliament the most austere budget in three decades, which aims to cut the deficit in half in two years.
“There is a risk of a two-notch move, or one-notch with some warnings that they could go lower is feasible,” said Harvinder Sian, a senior bond strategist at Royal Bank of Scotland Plc in London. “A two-notch probably isn’t priced in.”
The spread on Spanish 10-year debt rose to 191 basis points at 11:14 a.m. in Madrid, compared with 187 basis points yesterday. The extra yield investors demand to hold Portuguese and Irish debt surged to euro-era records today, increasing pressure on Spain.
Fitch Ratings cut Spain to AA+ on May 28, citing concerns over economic growth. Standard & Poor’s ranks the nation AA after stripping Spain of the top rating in January 2009."

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