So much for the latest European bail out. Not even a full week after the last European dead of night summit, which supposedly "was different this time", and Spanish bond yields have already retraced virtually the entire move lower, and after sliding to as low as 6.1%, are now back to 6.62% as of this morning, 22 bps wider on the day, as a result of the now generic realization that nothing actually changed, and also following the latest abysmal and unsustainable (there's that key word again) auction out of Spain, which sold bonds due 2015, 2016 and 2022, even as its default risk is now wider than that of Ireland.
Spain sold 3 billion euros ($3.75 billion) of medium- and long-term debt on Thursday, at the top end of its target, though doubt over the details of an European accord forced the Treasury to pay the highest rate for its 10-year bond since November.
The 2022 paper, which sold 747 million euros at an average yield of 6.43 percent, was auctioned for only the fourth time this year on Thursday as the government concentrated on lower, less expensive maturities.
The benchmark bond, which has a coupon of 5.85 percent, was last sold June 7 at an average yield of 6.044 percent at a bid-to-cover ratio of 3.3 compared to a ratio of 3.2 on Thursday.
The Treasury also sold 1.2 billion euros of a bond maturing July 30, 2015 at a yield of 5.086 percent compared to a yield of 5.457 percent June 21. The bond was 2.3 times subscribed compared to 3.2 times last month.
A bond maturing Oct. 31, 2016 sold 1 billion euros at a yield of 5.536 percent, after 5.353 percent on June 7, with a bid-to-cover ratio of 2.6, the same as at the previous auction.
Those who bought the 10 year paper are already losing big in under 3 hours, as the last benchmark quote was about 20 bps wider.
In other news, Ireland is not Uganda:
Ireland returned to short-term debt markets on Thursday for the first time since before its EU/IMF bailout in November 2010, paying less for three-month paper than Spain which has avoided going to international lenders for a full sovereign rescue.
In a tentative first step following a near two-year hiatus, Ireland sold 500 million euros of treasury bills at an average yield of 1.8 percent.
Dublin, effectively shut out of capital markets before the 85 billion euro ($107 billion) bailout, is likely to run a number of t-bill auctions before attempting a long-term issue towards the end of this year or early next.
Ireland is the only country that has not sold treasury bills during its bailout and given that Greece has consistently auctioned three-month debt and Portugal has even tested appetite with 18-month bills, analysts saw Dublin having few difficulties.
And now that Europe is unfixed again, everyone's attention turns to Frankfurt, where woe is Spain if Draghi disappoints and only drops rates by 25 bps (or not even that), a move which is now priced in completely.