Spain sold around €6 billion of 10-year bonds today, a source close to the process said, attracting investors with high returns as it passed a key test of its ability to raise longer-dated debt in a wary market.
The Treasury priced the benchmark, syndicated issue at mid-swaps plus 195 basis points and saw demand for over €13 billion of paper, the source said. Spain closed the book at 10am.
The transaction precedes a €16.2 billion 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 necessitate a Greek-style bailout.
"The timing on this issue could have been better because there's a lot of fretting about Spain at the moment," but the pricing was attractive for investors, said economist at 4Cast Eric Wand.
Interest was strong among non-residents, the source added.
Spain's previous 10-year issue in January was priced close to 150 basis points lower, raising €5 billion also with solid demand.
Spain's 10-year bond, with 4 per cent coupon, was trading in the secondary market at mid-swaps plus 182 basis points at 10.15am, implying a premium of around 15 basis points for the new bond.
The five-year credit default swap for Spanish debt was 254 basis points at 10.10am, 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.
Yesterday, 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.
Spain must redeem a five-year bond of €16.2 billion before the end of the month, and the government has said it will meet the payment easily.
"The Treasury has over €20 billion 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," the source said.
Asked whether he could confirm the reserve figure, Treasury secretary Carlos Ocana said yesterday, "The Treasury will meet all the state's spending needs this year."
Spain booked solid demand of over €12 billion for an issue of 5 billion euros in a 15-year benchmark at mid swaps +85 basis points on February 17th.
The last new benchmark 10-year issue was January 13th, when the government also sold €5 billion and priced at the more expensive end of guidance of 53 to 56 basis points over mid-swaps.
Reuters