Spanish bond yields turn to lowest since April
Investors are asking for a lower return to hold Spanish debt, easing fears that the troubled nation will need an imminent bailout.
The yield on the Spanish 10-year bond earlier dropped to 5.54%, the lowest since April.
In July, the bonds surged to more than 7% - levels that had prompted bailouts for Greece, Portugal and Ireland.
Spain's situation continues to worry investors, with many of its regions asking for aid.
The nation's stock market gained, up 1.9%, while other European stock indexes showed smaller gains.
Meanwhile, Germany - Europe's largest economy - upgraded its growth forecasts for 2012 to 0.8% from 0.7%, but cut its prediction for next year from 1.6% to 1%.
And French President Francois Hollande told newspapers that an end to the crisis in the eurozone was "very close".
The ratings agency Moody's also announced it would leave Spain's sovereign credit rating at just one notch above so-called junk status, with a negative outlook.
Some had feared it would be downgraded to the status that suggested it was likely to default on its debt.
In September, Spain's central bank said the value of bad debts held by Spain's banks in July rose to 169.3bn euros ($221bn; £136bn). It was the highest bad loan ratio since the central bank began compiling the data in 1962.
These are the debts - mortgages and loans to property developers - that got Spain into so much trouble in the years before the 2008 crisis. With banks going bust under their bad debts, Madrid is being left to cover the cost of propping up the banks.
Spain has already been granted a loan package of 100bn euros by Europe's bailout fund for use by its banks.
But almost a quarter of Spaniards are now out of work and many analysts believe Spain is inching closer towards seeking a full financial bailout.
In July, Spain's 10-year bond yields reached 7.6% - the highest since the euro was introduced in 1999.