Spain succeeded in raising a total of EUR 541bln in today’s bond auction, surpassing the maximum target range of 2.5bln. The healthy investor appetite for Spanish debt could bolster confidence in the beleaguered Euro and risk-correlated assets. Additionally, Madrid’s apparent ability to get a handle on its debts could help the struggling nation avoid a deep recession.

But although the auction raised money for the cash-strapped nation, the flush results came at the cost of higher yields. The 10-year benchmark bond’s average yield was 5.789%, compared to 5.403% in January. 2-year securities went at 3.463% versus last month’s 2.07%.

Higher yields notwithstanding, the Tesoro has now reached almost 50% of its 2012 funding target, an encouraging development for an economy which many see as the Eurozone’s weakest. Concern over the health of Spain’s beleaguered financial institutions has fueled speculation that the Iberian nation will be next in line for a bailout from the European rescue fund. If realized, such a development would make the recent Greek crisis seem like small potatoes given the Spanish economy’s relative enormity.

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EUR/USD responded to today’s auction results with a spike past the pre-auction high of 1.3158. The pair hit 1.3166 before subsiding. Bunds, gilts, and Spanish stocks also gained intraday.