A 15 year syndicated bond from Spain is a punchy trade for this stage in the eurozone financial crisis – and especially when the anxiety index was cranked up last week by the resignations of several Portuguese ministers, threatening the country's pro-austerity coalition. It didn't take long for market participants to clock that Spanish banks have quite a lot of exposure to Portugal.
But Spain’s €3.5bn deal, led by BBVA, BNP Paribas, Caixabank, Crédit Agricole, Credit Suisse, and Société Générale, flew out of the starting gate on Tuesday morning – hammering the final nail into the contagion coffin, it must be hoped. No longer do problems in one peripheral eurozone sovereign domino into market chaos in others. Well, not till the next time, anyway.
But that is not to say the sovereign debt crisis is cured. Rather, the fact that Spain issued now rather than delaying until after the summer – when Germany will be in the throes of an election – may well prove a prudent step. By September, several issues relating to the crisis are likely to rear their heads.
Apart from further Troika inspections of the bailed out countries and their economic progress, or lack thereof, the German elections are likely to throw intense scrutiny on the willingness of the eurozone’s most powerful electorate – the Germans – to continue sponsoring the periphery’s rehab programmes for debt addiction.
No doubt politicians will try and tug at German voters’ patriotic heart strings by harping on the best and worst aspects of continued involvement in the European debt cure. That will drive volatility upwards as investors and political leaders in other countries react.
It seems unlikely that one election in Germany – one of Europe's most politically stable countries – could undermine the entire European rescue effort so far.
But in terms of timing its deal, Spain would have been unwise to leave it any later.