MADRID: Spain sold around 6 billion euros ($8.05 billion) of 10-year bonds on Tuesday, July 6 a source close to the process said, drawing investors with high returns to pass a key test of its ability to raise longer-dated debt in a wary market.
The Treasury priced the syndicated benchmark issue at mid-swaps plus 195 basis points and attracted demand for over 13 billion euros, the source said.
The transaction precedes a 16.2 billion euro redemption later this month and follows a two-month sell-off of Spanish bonds on concerns -- repeatedly denied by government officials -- that the country's weak economic performance and large deficit might lead to a Greek-style bailout.
"It's encouraging that people are still willing to lend to Spain at a bit of a premium and shows it's not at a level that's particularly worrying and shouldn't have any trouble tapping the market in future," said economist at Capital Economics Ben May.
The government has introduced a 15 billion euro austerity plan, passed labour market reforms and set about restructuring its banks in the last few months as part of efforts to prove to markets it was serious in rebuilding its battered economy.
"Perhaps people are starting to think the government is getting its act together and, while these measures may not to very strong on the surface, they are a step in the right direction," May said.
Interest for the bond was strong among non-residents, the source added.
Spain's previous 10-year issue in January was priced some 140 basis points lower, raising 5 billion euros also with solid demand.
On Tuesday Spain's 10-year bond, with a 4 percent coupon, was trading in the secondary market at mid-swaps plus 182 basis points at 1015 GMT, implying a premium of around 15 basis points for the new bond.
The 5-year credit default swap for Spanish debt was 254 basis points at 1010 GMT, little changed on the day, said CMA DataVision, a CDS monitor. CDS measures the cost of insuring a country's debt against default within five years.
On Monday, Spain named the banks involved in the 10-year syndication as Barclays, BBVA, Caja Madrid, Credit Agricole, Deutsche Bank and Santander.
The Treasury declined to comment until the transaction was concluded.
''
JULY REDEMPTION
Spain must redeem a 5-year bond of 16.2 billion euros before the end of this month, and the government has said it will meet the payment easily.
"The Treasury has over 20 billion euros in cash reserves which it has built up over the year to face this redemption. The July debt payment is not a surprise for the government and, obviously, it planned in advance," a bond trader at a Spanish bank said.
Asked whether he could confirm the reserve figure, Treasury Secretary Carlos Ocana said on Monday, "The Treasury will meet all the state's spending needs this year."
The Treasury said on June 18 it would launch a syndicated bond some time in the third quarter.
Economy Minister Elena Salgado said on Tuesday investors were interested in Spanish debt.
"We are having no difficulties in issuing debt. (Auctions) are more than sufficiently covered, with important levels of excess demand," she told reporters on the sidelines of parliament.
The Treasury's last debt issue -- a 5-year bond on July 1 -- was well received despite Moody's placing Spain's Aaa credit rating under review a day earlier for possible downgrade.
Spain's 10-year bono spread against the equivalent German bund was at 209 basis points at 1231 GMT, off an intraday high of 215 bps. - Reuters
The Treasury priced the syndicated benchmark issue at mid-swaps plus 195 basis points and attracted demand for over 13 billion euros, the source said.
The transaction precedes a 16.2 billion euro redemption later this month and follows a two-month sell-off of Spanish bonds on concerns -- repeatedly denied by government officials -- that the country's weak economic performance and large deficit might lead to a Greek-style bailout.
"It's encouraging that people are still willing to lend to Spain at a bit of a premium and shows it's not at a level that's particularly worrying and shouldn't have any trouble tapping the market in future," said economist at Capital Economics Ben May.
The government has introduced a 15 billion euro austerity plan, passed labour market reforms and set about restructuring its banks in the last few months as part of efforts to prove to markets it was serious in rebuilding its battered economy.
"Perhaps people are starting to think the government is getting its act together and, while these measures may not to very strong on the surface, they are a step in the right direction," May said.
Interest for the bond was strong among non-residents, the source added.
Spain's previous 10-year issue in January was priced some 140 basis points lower, raising 5 billion euros also with solid demand.
On Tuesday Spain's 10-year bond, with a 4 percent coupon, was trading in the secondary market at mid-swaps plus 182 basis points at 1015 GMT, implying a premium of around 15 basis points for the new bond.
The 5-year credit default swap for Spanish debt was 254 basis points at 1010 GMT, little changed on the day, said CMA DataVision, a CDS monitor. CDS measures the cost of insuring a country's debt against default within five years.
On Monday, Spain named the banks involved in the 10-year syndication as Barclays, BBVA, Caja Madrid, Credit Agricole, Deutsche Bank and Santander.
The Treasury declined to comment until the transaction was concluded.
''
JULY REDEMPTION
Spain must redeem a 5-year bond of 16.2 billion euros before the end of this month, and the government has said it will meet the payment easily.
"The Treasury has over 20 billion euros in cash reserves which it has built up over the year to face this redemption. The July debt payment is not a surprise for the government and, obviously, it planned in advance," a bond trader at a Spanish bank said.
Asked whether he could confirm the reserve figure, Treasury Secretary Carlos Ocana said on Monday, "The Treasury will meet all the state's spending needs this year."
The Treasury said on June 18 it would launch a syndicated bond some time in the third quarter.
Economy Minister Elena Salgado said on Tuesday investors were interested in Spanish debt.
"We are having no difficulties in issuing debt. (Auctions) are more than sufficiently covered, with important levels of excess demand," she told reporters on the sidelines of parliament.
The Treasury's last debt issue -- a 5-year bond on July 1 -- was well received despite Moody's placing Spain's Aaa credit rating under review a day earlier for possible downgrade.
Spain's 10-year bono spread
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