* Spain swaps expensive crisis bonds for new issue
* Treasury prices 9 billion euros of 10-year bond
* Spain follows lead of other crisis-hit countries
* Economists warn markets of Spain's deficit problems (Updates with pricing details, comments)
By John Geddie and Sarka Halas
LONDON, June 12 (Reuters/IFR) - Spain took steps to ease hefty bond repayments coming due next year by swapping expensive debt issued at the height of the euro zone crisis for a new 10-year bond on Thursday.
The fragile euro zone peripheral state is the last of its peers to adopt such measures, aiming to lengthen the average maturity of its debt and soothe investor nerves over how it will pay back around 500 billion euros of bonds that fall due in the next four years.
Spain sold 9 billion euros of new 10-year bonds, more than a third of which were handed to investors in exchange for bonds maturing in 2015.
"It's a smart thing to do because it takes advantage of a market situation which is very friendly for issuers, and it is something that other issuers, like Italy, now do routinely," said Luca Cazzulani, a rate strategist at UniCredit.
The new bond, sold via a syndicate of banks, was priced to yield around 2.8 percent - some 5 percentage points lower than Spain's borrowing costs were at the height of the debt crisis in 2012. Over 18 billion euros of orders were placed.
Back when Spain looked at imminent risk of a bailout it could only sell shorter-term bonds, pushing the average maturity of its debt down from a peak of 6.85 years in 2007 to 6.35 years at the end of last month.
More than half of Spain's 927 billion euro ($1.25 trillion) debt matures within the next four years, according to Thomson Reuters data.
Madrid now has the perfect opportunity to ease this strain, bond traders said.
The market for Spanish debt has dramatically improved in recent years, bolstered by loose central bank policy and a fledgling economic recovery.
After the European Central Bank last week announced its latest round of stimulus designed to keep rates at historic lows, a widespread investor hunt for returns saw Spanish 10-year bonds trade at record lows of 2.5 percent.
The last time Spain used debt management tools of this kind was in 2006, but its southern European neighbour Italy and bailed-out Ireland, Portugal and Greece have all done so in recent years.
The Spanish Treasury accepted 2.143 billion euros of a 3 percent April 2015 bond, 604 million euros of a 4 percent July 2015 bond and 915 million euros of a 3.75 percent October 2015 bond as part of the switch offer.
This exercise is likely to be the first of many for Spain, strategists said.
"If you look at the redemption profile of peripheral countries it makes sense, especially given that in 2010-11 they issued a lot of short-term paper, to have this kind of debt management operation on a more regular basis," said Patrick Jacq, rate strategist at BNP Paribas.
However, it may not assuage some concerns that Spain is not doing enough to reduce its public deficit, which is one of the highest in the euro zone.
While Spain is expected to have little problem closing in on its 2014 deficit target of 5.5 percent, it is expected to struggle to meet the 2015 and 2016 targets without more austerity measures it has already ruled out.
"While they are supposed to be in a period of financial austerity, they are still spending like there is no tomorrow," said Souheir Asba, euro economist at SG CIB.
"While the market is asleep, they had better try to get as much cheap financing as they can."
Spain said last week that a boost in tax revenues had allowed it to cut its net debt issuance target to 55 billion euros from the 65 billion euros it announced in January.
Treasury sources told Reuters that Spain's 2014 gross debt issuance target would not change, however, giving it room to buy back more expensive bonds already in the market or just keep the extra cash raised to ease its 2015 target. (Graphic by Vincent Flasseur additional reporting by Marius Zaharia in London and Paul Day in Madrid, editing by Kevin Liffey and Philippa Fletcher)