Spain Sells Bonds Through Banks, Auctions Bills Below 1%

Spain sold 7 billion euros ($9.1 billion) of a new benchmark 10-year bond through banks after the nation auctioned 12-month bills at a yield of less than 1 percent for the first time in three years.

The 10-year sale attracted bids exceeding 21 billion euros and the bonds were sold to yield 4.452 percent, according to a person with knowledge of the deal who asked not to be identified because they’re not authorized to speak about it. At a similar sale on Jan. 22, Spain issued 7 billion euros of securities maturing in January 2023 at a yield of about 5.4 percent.

Spain allotted 3.03 billion euros of bills maturing in May 2014 at an average yield of 0.994 percent at an auction today, the Bank of Spain said in Madrid. That’s the lowest rate since a sale in April 2010.

“It is the continuation of this normalization process that we’ve seen now for quite a few months,” Luca Jellinek, the head of European fixed-income strategy at Credit Agricole Corporate & Investment Bank in London, said before the 10-year bond was priced. “Other syndications have done pretty well. It’s likely to continue, what isn’t obvious is whether the pace of normalization will remain as rapid.”

Spain’s Treasury is seeking to benefit from a drop in its borrowing costs since European Central Bank President Mario Draghi pledged in July to do whatever is needed to hold the single currency together.

Italian Sale

Italy separately hired banks to sell 30-year securities in the near future, the nation’s finance ministry said in an e-mailed statement.

At today’s bill auction, Spain also sold 1.01 billion euros of six-month debt at a yield of 0.492 percent, down from 0.53 percent on April 16. Demand was 4.65 times the amount sold, and the bid-to-cover ratio on the longer-dated securities was 2.03, the Bank of Spain said.

The Madrid-based Treasury mandated Barclays Plc, CaixaBank SA, Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc. and Santander GBM for the syndicated sale.

Portugal sold 10-year bonds for the first time since its bailout in 2011 via banks on May 7 and attracted demand for more than three times the amount the government was seeking.

The yield on Spain’s 10-year bond due in January 2023 climbed six basis points, or 0.06 percentage point, to 4.34 percent as of 5 p.m. London time today. Benchmark yields rose to a euro-era high of 7.75 percent in July.

The Treasury returns to the market next week to sell three-and nine-month bills on May 21 and bonds on May 23.