Spain Pays Higher Rates to Borrow Money

Spain was forced to offer sharply higher returns on Tuesday to sell 2.885 billion euros ($4.17 billion) in short-term bonds as investors worried over sovereign debt burdens in the Eurozone.

The Spanish treasury had to offer a rate of 1.899 percent to borrow money for three months, up from 1.568 percent at the last such auction on June 21.

For six-month bills, the yield soared to 2.519 percent from 1.776 previously.

Both rates were well above market levels, with three-bonds month closing on Monday with a yield of 1.625 percent and six-month bills at 1.825 percent.

However demand was strong at 9.3 billion euros, which enabled the treasury to achieve its objective of raising 2.0-3.0 billion euros.

Yields on benchmark 10-year Spanish bonds have climbed recently to levels generally considered to be unsustainable in the long-term, a signal that Spain is being sucked into the Eurozone debt crisis.

Spain, with an economy the size of the Greek, Irish and Portuguese economies combined, has been battling to convince markets that it should not be lumped together with the three lame ducks now under EU and IMF rescue programs.

But it continues to suffer from the risk of contagion from the crisis.