Spain’s Treasury aims to cover as much as 13 percent of its planned gross debt issuance for 2013 in January after investors bought 7 billion euros ($9.3 billion) of 10-year bonds in a syndicated sale that saw record demand.
The Treasury may end the month with total issuance of 27 billion euros depending on the final results of bill sales, the Economy Ministry in Madrid said in an e-mailed statement late yesterday. That compares with a goal of 215 billion to 230 billion euros of bonds and bills for the whole year.
Foreign investors bought more than 60 percent of a new benchmark 10-year bond issued yesterday. Around a quarter of the allotted amount was bought by investors from the U.K., 17 percent from euro-region nations, 7 percent from Nordic countries, 3 percent from the Middle East and 3 percent from the U.S., according to the statement.
Spain is taking advantage of a rally in securities of so-called peripheral countries to fast-track debt sales as it faces a 24 percent increase in net funding needs this year. The European Central Bank’s pledge to help nations bring down yields may curb borrowing costs until a recovery, Prime Minister Mariano Rajoy said last month.
The yield on Spain’s 10-year benchmark bond was unchanged at 5.11 percent at 9:13 a.m. in Madrid today, compared with a euro-era record of 7.75 percent on July 25, before ECB President Mario Draghi pledged to backstop the region’s fourth-largest economy.
The security, which matures on Jan. 31, 2023, and has a 5.4 percent coupon, was sold by six banks at 365 basis points more than the mid-swap rate, or an average yield of 5.403 percent, according to Spain’s Treasury. That compares with 5.290 percent when it last auctioned 10-year debt on Dec. 5.
Demand was around 22.7 billion euros and was shared among more than 350 investor accounts, the highest volume in the history of the Treasury’s syndicated sales, the ministry said.
The sale bodes well for the country’s issuance plans in the short term, said Lyn Graham-Taylor, a fixed-income strategist at Rabobank International in London. Spain will probably seek to sell more long-dated bonds, although it is hard to see issuance of debt dated much longer than 10 years, he said by telephone.
Asset managers represented 40 percent of the amount placed yesterday and banks 34 percent, the ministry said. Pension funds and insurance companies bought 13 percent and central banks 7 percent.
Sign of Credibility
The Treasury decided to go ahead with the syndication after Spain’s short-term borrowing costs dropped and it saw high demand at a sale of 2.8 billion euros of bills, the ministry said. Economy Minister Luis de Guindos yesterday told reporters in Brussels that the debt sales are “a clear indication of the Spanish economy’s credibility.”
De Guindos said 2012 budget data expected in the coming weeks will be “positive.” Still, the European Commission yesterday said the nation will probably miss its deficit target of 6.3 percent of output in 2012 even if the most recent budget cuts produce their full impact in the last quarter.
“What will stand out in the end is the huge effort Spain has made to reduce its public deficit in a very complicated environment,” de Guindos said. Spain’s planned austerity measures through 2014 will be sufficient, he said.
Economists forecast Spain’s recession will deepen in 2013, the fifth year of its economic slump. That will undermine efforts to tackle the second-largest deficit in the euro area, at 9.4 percent of gross domestic product in 2011, they say.