Spain passed its biggest test of market sentiment so far this year on Thursday, selling far more longer-term debt than expected as the government pressed ahead with efforts to tackle its problems with the help of a European Central Bank backstop.
In Paris, France also drew strong demand at its first bond auction since Standard and Poor's stripped the country of its AAA credit rating.
Spain's first 10-year bond offering since mid-December raised 3 billion euros at a yield of 5.403 percent, broadly in line with analysts' expectations.
The yield was down more than 150 basis points from a previous sale of the bonds in November, offering some measure of the progress Madrid and euro zone policymakers have made in easing the pressure on its finances.
In all, the Treasury sold 6.6 billion euros ($8.46 billion) of bonds maturing in 2016, 2019, and 2022, far more than the 4.5 billion targeted. Bid to cover rates on the issues ranged from 2.0 to 3.2.
Neither the (2016) nor the 10-year benchmark offered any concession ahead of today's tap and the solid demand is a clear sign that market interest for EMU (euro zone) periphery has clearly picked up, said Annalisa Piazza, market economist at Newedge Strategy in London.
Other euro zone sovereign debtors have leapfrogged Spain to become more prominent targets for investors, but it remains in the market's sights.
Spanish sovereign yields rose after the auction, with 10-year paper up 9 bps higher at 5.28 percent and the 10-year Spanish/German yield spread also widening 9 basis points to 347 basis points.
Credit Agricole rate strategist Peter Chatwell said he expected that trend to reverse during the day as the fact is this is another auction which exceeds the target amount.
Spain has easily sold shorter-dated debt in recent weeks, aided by the European Central Bank flooding banks with cheap three-year loans and buying Spanish and Italian debt regularly on the market.
But while banks were willing to reinvest the three-year loans over a similar or shorter timescale, finding buyers for 10-year paper was considered a sterner test.
In Paris, the national debt management agency sold 7.965 billion euros of medium-term bonds at the top of a target range of 6.5-8.0 billion. It received bids for 18.9 billion euros.
S&P's downgrade on Friday was largely anticipated by the market and has had little impact on French yields in the secondary market and in a short-term bill auction on Monday.
($1 = 0.7802 euros)
(Additional reporting by Leigh Thomas in Paris and Kirsten Donovan in London)