Spain is planning a benchmark sale of 15-year bonds in euros, its first issue since concern about the ability of southern European countries to contain budget deficits roiled markets.
The country is selling bonds as European finance ministers meet in Brussels to discuss support for Greece, whose struggle to contain the region’s largest budget shortfall is hurting its neighbors. The cost to insure against a default on Spain’s bonds rose, according to credit-default swap prices.
“The bond sale is a real test for Spain and other countries facing pressure because of their big deficits,” said Ivan Comerma, head of capital markets at Banc International- Banca Mora in Andorra, who was invited to buy the notes.
The bond is Spain’s first since it sold €5 billion of 10-year notes at a yield of 75.9 basis points more than benchmark German government debt on Jan. 13. A basis point is 0.01 percentage point.
“Spain should offer a spread of at least 90 basis points over German bonds to get the deal done,” said Banc International-Banca Mora’s Comerma.
Credit-default swaps protecting Spanish debt for five years rose 1.5 basis points today to 141, according to CMA DataVision prices. The contracts soared to a record 173.5 on Feb. 8.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company or country’s ability to repay debt. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.