The Bank of Spain provided 1,145 billionpesetas in assistance funds which bankers said reflected fears
of fresh increases in overnight rates.
    The daily auction was the biggest of the year and comes
after the previous record set last June 6 of 1,240 billion
pesetas.
    A spokesman for one of Spain top five banks said higher
overnight call money rates were expected in the short term in
view of disappointing money supply figures for February.
    The M-4 money supply, measured as liquid assets in public
hands, rose 16.7 pct last month against 8.1 pct in January and
compared with this year's eight pct target. Money supply growth
was 11.4 pct last year.
    The central bank on Tuesday raised overnight rates by a
quarter of a percentage point to 14 pct on demand for 746
billion pesetas. Rates stood at 12.1 pct at the start of the
year and have been increased to drain liquidity on rising
demand for funds. "The policy is proving counter-productive and
rates will have to come down in the long-term," the bank
spokesman said in reply to Reuters enquiries.
    He said higher rates were fuelling an influx of short-term
speculative capital from abroad.
    "At least 800 mln dlrs of current excess liquidity in the
system is convertible pesetas from West Germany and other
countries with much lower rates," he said.
 REUTER
