Spanish notes led losses in European sovereign debt markets after demand fell and borrowing costs rose in the nation's first auctions since announcing that public debt will surge to a record this year.

The declines pushed the yield on Spanish five-year notes to the highest in 12 weeks, while similar-maturity Italian debt slid and Greek bonds fell. Benchmark German bunds rose as the nation sold securities due in February 2017. The European Central Bank held its main refinancing rate at a record low 1 percent, in line with the forecast of all 57 economists in a Bloomberg News survey.

"The auction reflects market disappointment with recent fiscal policy" in Spain, Luca Jellinek, head of European interest-rate strategy at Credit Agricole Corporate & Investment Bank in London, wrote in an e-mailed report. "The immediate post-auction price action is bearish. This kind of price action in the periphery is clearly supportive for German bunds."

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