Recession-hit Spain kicked off a tough 2013 funding programme on Thursday with a well-received debt auction that raised 5.8 billion euros, selling above its target range at lower borrowing costs. Most demand was for paper maturing in March 2015 that would be covered by a European Central Bank bond-buying programme if Spain applied for international aid, offering an additional safety net for investors seeking higher rates of return. "It was a good auction. Demand was strong for three... reasons: risk aversion indicators are at a low, volatility has nose-dived and (investor) portfolios are very liquid," said Jose Luis Martinez, Citigroup strategist in Madrid. The market's reaction told the same story, with the yield on Spain's benchmark 10-year bond dipping after the auction to 4.97 percent, its lowest level in 10 months. Spain, which placed the 2015 bond at around half that rate, is mired in recession and the government has slashed spending to reduce a high public deficit, which has aggravated the slowdown. It has said it will need to raise 121 billion euros in bonds this year - up almost 8 percent from last year - as piles of debt mature and the country's financially troubled autonomous regions soak up huge sums in rescue funds.

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