Struggling Spain managed to prise another 4 billion (£3.3 billion) from jittery bond markets today but was forced to pay more for the privilege after Moody's cut its credit rating earlier this week.
It paid 3.3% on average for three-year debt, up from the 2.9% charged by bond markets at a similar auction on February 2.
The auction also came a day after official figures confirmed that Spain's economy shrank by 0.3% in the final quarter of 2011 and politicians prepared to pass a bill aimed at strengthening the Spanish banking sector.
On Tuesday Spain saw its credit rating downgraded two notches to A3, and today Moody's put its banks in the firing line for potential downgrades. But there was still decent demand for the bonds as investors are flush with cash from the European Central Bank.
Lloyds Bank Corporate Markets analyst Eric Wand said: "It looks like Spain is still attracting plenty of appetite, which, given the general liquidity backdrop, is to be expected, but the demand at the sale doesn't seem to be overly impacted by what's happening with regards to Greece."
European finance ministers have put off agreement on a 130 billion bailout for the crisis-hit nation until Monday.
Spain's benchmark cost of borrowing for 10 years also ticked higher to 5.46% today while Italy - also in the sights of the bond markets - is now paying 5.77% for 10-year debt.
