Spanish Corporate Bonds Lead Best Performers in Europe in 2013

Spanish corporate bonds are set to hand investors the biggest returns this year among investment-grade company debt sold in Europe.

Gas Natural SDG SA, Spain’s largest gas supplier, and Telefonica SA, the nation’s biggest phone company, led gains with returns of 18.6 percent and 18.3 percent, according to Bloomberg bond index data. Non-financial notes from Europe’s periphery returned an average 5 percent this year compared with 1.9 percent for investment-grade notes in euros, Bank of America Merrill Lynch index data show.

Spanish debt is rewarding investors after the nation ended a two-year recession in the third quarter. That prompted Fitch Ratings, Standard & Poor’s and Moody’s Investors Service to raise their outlook for Spain’s credit rating to stable, citing the country’s improving growth prospects.

“International investors are showing a lot of confidence in Spain as the macroeconomic situation has significantly improved this year,” said Cristina Martinez, an investor who helps oversee about 6 billion euros ($8.3 billion) in fixed income at Ibercaja Gestion SGIIC SA in Zaragoza, Spain. “There’s still a pick-up in yield from Spanish companies compared to those based in Europe’s core that’s worth taking advantage of.”

Peripheral corporate bonds yield an extra 0.31 percentage points compared with securities from Europe’s core nations including Germany and France, according to Bank of America Merrill Lynch index data. It’s the narrowest spread in almost four years, the data show.

Top 16

Securities issued by Spanish companies, including Unicaja Banco SA and Abertis Infraestructuras SA, account for 12 of the top 16 investment-grade performers in Europe this year, according to Bloomberg bond index data. The remaining four are from Italian borrowers, led by Enel SpA, whose 5.625 percent notes gained 12.9 percent.

Companies in Spain raised 51 billion euros from bond sales in Europe this year compared with 47 billion in 2012, according to data compiled by Bloomberg. Non-financial Spanish borrowers issued a record 6 billion euros of high-yield notes as they sought alternatives to bank funding.