Spain’s Castile-Leon Seeks to Reopen Public Debt MarketAngeline Benoit and Esteban Duarte
Spain’s Castile-Leon will sound out markets next week with a view to selling about 200 million euros ($267 million) of bonds, in what would be the first public debt sale by a Spanish region since January.
“We are interested in a long-term public issuance,” Castile-Leon Budget Chief Maria del Pilar del Olmo Moro said in a telephone interview today from Valladolid, Spain. “Loans currently represent about 70 percent of our debt and we want to diversify our investor base.”
The northern region, which contributes to 5 percent of Spain’s gross domestic product and last sold debt publicly in December 2012, aims to sell maturities of seven years or more and to attract foreign investors. It also plans to sell another 51 million euros of debt through private operations.
Spanish regions have struggled to access debt markets since 2010, prompting the central government to create bailout facilities last year to raise funds on their behalf. As foreign investors return to Spain’s sovereign debt market, encouraged by the European Central Bank’s pledges to back the euro, regional governments have also seen their bond yields ease.
“There has been a significant tightening of the risk spread for Spain,” said Serafi Rodriguez, an Andorra-based fixed-income trader at Morabanc, which manages 6.5 billion euros of assets, including Spanish regional bonds. “Investors are significantly more positive on Spain and as a consequence on some of its regions too.”
Nine of Spain’s 17 semi-autonomous regions still rely on the central government for funding, including Catalonia, the largest. Its finance chief, Andreu Mas-Colell, said today it doesn’t plan to issue its own debt in 2014.
Madrid, the country’s second-largest regional economy, was the last to sell debt publicly, in January, according to data compiled by Bloomberg. It has since issued debt through private transactions in order to lower borrowing costs, a spokesman for its economy department said today, asking not to be named in line with the region’s policy.
Castile-Leon and others are raising more debt after the Budget Ministry authorized them in July to run bigger deficits in 2013 than the 0.7 percent of GDP they’d budgeted last year. Del Olmo said it closed a deal with banks this week for 27 million euros of 2022 bonds at a spread of 85 basis points over similar Spanish Treasury maturities.
“We are seeing demand whereas last year was terrible, there was none at all,” she said. The region’s debt amounted to 14.7 percent of its GDP in the second quarter, below the regional average of 18.9 percent.
The region of Aragon issued 171 million euros of 2018 notes last week through a private sale at a yield of 4 percent, a spokesman for its budget department said today, asking not to be named in line with government policy. The yield on Spain’s five-year benchmark was at 3.25 percent at 4:42 p.m. in Madrid, compared with a euro-era high of 7.79 percent in July 2012.