The Spanish treasury on Thursday sold €3.3bn of medium-term sovereign bonds, close to the maximum of €3.5bn it wanted, in an auction that was closely watched by investors amid increased tension in eurozone financial markets this week.

As expected, yields were higher than for previous sales of the same bonds, but during the morning yields on the secondary market for Spanish paper declined, indicating reduced fears that Spain would need to follow Greece, Ireland and Portugal and seek a bail-out from the European Union and the International Monetary Fund.

The treasury said it had sold €2.2bn of bonds maturing in April 2014, at an average yield of 4.813 per cent, up from 4.037 per cent at the previous sale in June. It also sold €1.1bn of bonds maturing in January 2015 at an average yield of 4.984 per cent. The bid to cover ratios were a respectable 2.1 and 2.4 respectively.

Elena Salgado, Spanish finance minister, on Wednesday night insisted that the auction would go ahead in spite of nervousness in the bond markets, in order to show that Spain was capable of raising the money it needed to repay maturing debt and finance its budget deficit. Spain had never cancelled an auction even in turbulent times, she said.

Earlier this week, yields on Spanish and Italian 10-year bonds peaked above 6 per cent, with the Spanish spread over German Bunds – a sign of the greater perceived riskiness of Spain – topping 4 percentage points. That is close to the level regarded by analysts as unsustainable in the long term.

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