European banks led by Banco Santander SA (SAN) took advantage of demand for higher yields than on government debt to spur September’s financial bond issuance to 23.9 billion euros ($31 billion), the busiest month since June.
Spain’s biggest bank priced 2.5 billion euros of senior unsecured debt due 2016, the largest single issue from a financial company this month. A total 26.7 billion euros of debt was issued in June, according to data compiled by Bloomberg.
Investor sentiment, roiled by strains developing in the Spanish and Italian economies, improved after European Central Bank President Mario Draghi vowed in a July 26 speech to take whatever action was required to save the euro. The assurance opened a window for peripheral borrowers, which started to close this week as Spain’s debt crisis worsened.
“Things are in line with the positive sentiment toward the periphery we’ve seen following Draghi’s ‘whatever it takes’ speech,” said Suki Mann, head of credit strategy at Societe Generale SA in London. “It’s still expensive, still fairly stressed and we’re seeing mainly the best names, but it has been feeding into the general sentiment.”
Lenders including Banca Monte dei Paschi di Siena SpA (BMPS), which has had to borrow 3.4 billion euros from the Italian state, were able to sell senior unsecured debt. Italy’s third- largest bank issued 500 million euros of 4.875 percent bonds due 2014 priced to yield 497 basis points more than German debt. The spread is now 495 basis points, Bloomberg generic prices show.
Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s second-biggest bank, raised 2.5 billion euros in two deals, one of 1 billion euros due in 2014 and the rest in 4.375 percent notes due 2015.
The yield premium on the 2014 bond was 362 basis points, compared with a spread of 285 basis points between German and Spanish government debt of similar maturity on the sale date. The 2015 debt offered a spread of 429 basis points, 84 basis points more than the spread on government securities.
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