Spain sold 50-year government bonds for the first time, tapping investor appetite for longer-maturity debt, after its benchmark bond yields fell to records last week.
The Treasury sold 1 billion euros ($1.3 billion) of the 4 percent securities due in October 2064 in a private placement, it said today in a statement. Spain is capitalizing on a bond-market rally this year that sent yields on its 10-year debt to 2.083 percent on Aug. 27, the lowest since Bloomberg began collecting the data in 1993. The nation raised 5 billion euros in an inaugural sale in May of bonds tied to inflation.
“It fits into the stretch-for-yield environment,” David Schnautz, an interest-rate strategist at Commerzbank AG, said from London. “Investors have to move out both the credit and the maturity curve.”
Growth in Spain may reach 1.5 percent this year and 2 percent in 2015, the government said. Still, unemployment remains close to a record high of 26 percent and the nation’s public debt load has more than doubled since 2007 to close to 100 percent of gross domestic product.
The 10-year yield climbed two basis points, or 0.02 percentage point, to 2.25 percent at the 6 p.m. close in Madrid today. The 2.75 percent bond due October 2024 fell 0.22, or 2.20 euros per 1,000-euro face amount, to 104.47.
The 4 percent coupon on the 50-year debt “is exactly what life-insurance companies in Germany have to beat in terms of nominal yields for some legacy life insurance contracts, so both the maturity and the coupon appear tailor-made for them,” Commerzbank’s Schnautz said. “Similar restrictions are in place for other asset-liability-driven investors too.”
Spanish bonds have returned 13 percent this year through Aug. 29, set for the largest annual gain since 1996, according to Bank of America Merrill Lynch Indexes.