Bloomberg-- Spain sold 3.88 billion euros ($5.1 billion) of three- and six-month Treasury bills, near the maximum target, even as borrowing costs rose amid lingering concern the nation will struggle to fund its deficit.

The Treasury auctioned 3 billion euros of 84-day bills at an average yield of 1.804 percent, the Bank of Spain said today in Madrid. That compares with 1.743 percent the last time the securities were issued on Nov. 23. The government also sold 876.7 million euros of 175-day debt at 2.597 percent, up from 2.111 percent last month. It aimed to sell a maximum of 4 billion euros from the two sales.

“All in all the result looks good, especially considering the current difficult environment for periphery and the negative rating drift we have observed over the last week,” Chiara Cremonesi, a fixed-income strategist at UniCredit SpA in London, wrote today in a report. The six-month yield was “lower than the secondary market ahead of the auction,” while the three- month yield was “slightly higher than the market,” she said.

Spain is seeking to convince investors it won’t need to follow Ireland in seeking a European bailout. Moody’s Investors Service said on Dec. 15 it may lower the nation’s Aa1 rating as the 290 billion euros it estimates banks, the government and regional administrations must raise next year make it “susceptible to further episodes of funding stress.”

Bond Yields

The yield on the Spanish 10-year bond rose three basis points to 5.57 percent at 11:03 a.m. in London. The difference in yield, or spread, between the securities and benchmark German bunds rose four basis points to 257 basis points, compared with a euro-era high of 298 basis points on Nov. 30.

Demand for the Spanish three-month bills was 2.14 times the amount sold, compared with 2.34 at the last auction, the Bank of Spain said. The bid-to-cover ratio for the six-month bills was 5.15 times, compared with 2.65 times.

The government is pre-funding for 2011 as this year’s needs have already been met, Finance Minister Elena Salgado said on Nov. 26. Spain’s average cost of financing its outstanding debt is just over 3.6 percent and the country won’t face refinancing problems next year, Salgado said today.

To contact the reporters on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net