Spain Sells First 50-Year Government BondsEshe Nelson and Todd White
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.”
Today’s bond deal was arranged by Spanish banks Banco Bilbao Vizcaya Argentaria SA and CaixaBank SA.
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.