Spain’s 10 year syndication bears all the hallmarks of an unqualified success. After so much anticipation, it’s hardly surprising. The Spanish Treasury waited so long before mandating that one almost began to suspect it had already been and gone, such was the ubiquity of Spanish syndication chat last week.
It waited until success was assured and now it has an order book approaching €23bn — not so much a belt and braces approach to securing your cash but more one equipped with belt, braces, safety harness, hard hat and an armoured bunker.
It doesn’t make it certain that Spain will not need a bail-out, but it is as bold a statement as any that prime minister Mariano Rajoy made last year about not heading for a bail-out once the ECB’s Outright Monetary Transactions scheme had been devised.
It seems that Spain doesn’t merely have market access but also the key to the kingdom, for now.
But last week, after deals for Ireland, Instituto de Crédito Oficial, FADE, decent Spanish auctions and rallying spreads and yields in the Bonos market, speculation had already moved on to assessing Portugal’s syndicated chances.
It is understood to be roadshowing this week with a view to getting back into the market with a trade. Rabobank reckons the Portuguese are planning to be back in the market by the end of February.
But, as with the Ireland deal, doubt must remain over what the point of that exercise would be. As a rule, it is better to have access to capital markets than not. But surely state coffers would benefit more from the cheaper funding agreed under the bail-out package and ever cheaper bills auctions than paying up for a syndicated firework display of a deal.
Spain’s size, the liquidity on offer, and the size of its domestic banks and their ability to buy Bonos helps investors get over the alarming state of the country’s economy. You can park a chunk of money in Spain, at least for a little while, when pretty much all the decent government bond markets offer nothing by way of return.
Portugal, with an uncompetitive economy and a suspect banking sector, cannot offer that sort of liquidity and so it must pay a premium to issue. That is, if it can get investors at all.
If it does try to do a deal, it had better make just as sure as the Spanish did that the result is a foregone conclusion. Anything less than a success would be about as welcome as horsemeat in a hamburger.