Spain and Italy on Thursday followed Portugal by holding successful bond auctions, providing a glimmer of optimism in the eurozone debt crisis.
Italy sold €6bn of five-year and 15-year debt while Spain issued €3bn in five-year bonds, but both countries were forced to pay higher interest rates than in previous auctions.
The three successful auctions this week from peripheral eurozone countries provide a small amount of breathing room in the crisis. But the elevated yields paid by all of them and their high funding needs mean that investors are still waiting for decisive action from European policymakers.
Italy sold €3bn of 15-year bonds at a yield of 5.06 per cent, up from 4.81 per cent at a previous auction in November. Likewise, the yield on €3bn of five-year debt rose from 3.24 per cent two months ago to 3.67 per cent. Both auctions were fully covered.
Spain paid almost a percentage point more than it did in November with a five-year yield of 4.54 per cent.
Benchmark market interest rates -- yields on 10-year bonds -- fell for all peripheral eurozone countries in the wake of the auctions. Spain saw its yields fall 9 basis points to 5.34 per cent while Italy's softened 7 basis points to 4.69 per cent. The moves were more dramatic for five-year bonds with Spain's falling 18 basis points to 4.52 per cent and Italy's down 11 basis points to 3.69 per cent.
The euro initially rose against the dollar but in late-morning trading it was flat at $1.314. European equity markets were slightly softer, although the FTSE All-World index hit its highest level since August 2008.
All eyes are now turned to European policymakers. Germany is backing proposals to give new powers and lending capacity to the eurozone's bail-out fund. Coming on top of Portugal's successful auction on Wednesday, fresh intervention from the European Central Bank and signals of support from Japan and China, this has been a relatively good week for the eurozone.
But some analysts fret that the good headlines need to be translated into action. Jim Reid, credit strategist at Deutsche Bank, wrote on Thursday: "What we do know is that [policymakers] do need to be more proactive in order to push the problem much further into the horizon. Ironically a massively positive day like [Wednesday] reduces the urgency to be more proactive and the danger is that the headlines surrounding more imminent intervention could come to nothing". CNN
