The Spanish Treasury raised €3.51 billion ($4.75 billion) in bonds of five and ten years' maturity, with demand outstripping supply by a ratio of 2.2 to one.
It raised €1.18 billion of 10-year bonds with the rate of return falling to 4.269 percent from 4.503 percent in the last comparable auction on September 5th and its lowest level for this maturity at a debt sale since September 2010.
The Treasury also raised €1.38 billion in five-year bonds at an average yield of 3.128 percent, down from 3.477 percent at the last similar auction of September 5th, and €955 million in a note maturing in January 2018 at a yield of 2.795 percent, down from 3.001 percent.
The Spanish government had expected to raise €2.5-3.0 billion in the bond auction.
With Thursday's auction Spain has now completed 86.2 percent of its insurance target for 2013, the economy ministry said in a statement.
Borrowing costs for Spain and other nations on the eurozone's periphery have eased since the European Central Bank pledged last year to buy debt of troubled eurozone members if needed.
Spain, the eurozone's fourth-largest economy, is still struggling to overcome the aftermath of a decade-long property bubble that imploded in 2008, destroying millions of jobs and sending debt levels soaring.
The government has said it expects the economy to emerge from a two-year recession in the third quarter and will post growth of 0.7 percent next year.