Tempering Cédulas euphoria

With primary issuance faltering, the secondary market demand for peripheral countries has increased. Spain has been the principal beneficiary of this trend. Commerzbank analysts report that various single-name cédulas have tightened by around 50bp since mid-January but traders say tightening for issues like BBVA’s three-year has been much more, in the order of 75bp (from a 225bp launch spread). Though there is ongoing interest in other high yielding Spanish names, broader market factors, affecting cédulas hipotecárias, are unfavourable.