Spain

The European Investment Bank and the Region of Madrid stood out in the public sector bond market this week, with the former achieving its biggest ever order book for a euro benchmark.

The funding needs of Spain’s regions are expected to rise this year. The coronavirus pandemic is stretching healthcare resources, which are funded at a regional level, and will require financing, according to debt capital markets bankers.

Banco Santander wasted no time in heading to the non-preferred senior market this week, with investors responding well to the way in which European banks have been dealing with the coronavirus pandemic in their first quarter results.

The European Investment Bank achieved its biggest ever order book in euros on Tuesday, as it sold its first seven year benchmark of the year.

The region of Madrid and the European Investment Bank are both marketing seven year euro deals, with the former preparing the first green labelled bond by a Spanish government entity. Elsewhere in the euro public sector bond market, Ontario Teachers’ Finance Trust is moving forward with its first bond in the currency.

Any concerns over whether the eurozone periphery would have market access after Bund spreads yawned wider during the past week were put to bed by a combined €31bn of borrowing from Italy and Spain. The sovereigns paid what was needed to put impressive dents in their ballooning funding requirements, ahead of a hotly anticipated European Council meeting on Thursday. Lewis McLellan and Tyler Davies report.

Rating: Baa1/A/A-

Madrid is preparing to sell its first green labelled bond as early as next week, expanding on its established reputation as a sustainable bond issuer.

Spain enjoyed enormous demand for a 10 year syndicated bond on Tuesday, with an order book which was almost double the previous record for a single tranche euro public sector benchmark. Bankers away from the deal said investors were attracted by the big new issue premium on offer.

Supervisors are encouraging financial institutions to use all of their capital and liquidity buffers as necessary during the coronavirus crisis, signalling that lenders will be given a "significant" amount of time to restore their regulatory ratios to adequate levels.

Italy mandated banks for a new five year to be sold alongside a tap of a September 2050 bond on Monday as it prepares to bolt on a bigger funding programme in order to fund its effort against the coronavirus pandemic. The sovereign will be joined by Luxembourg in the euro public sector bond market on Tuesday.

Santander and Deutsche Bank in Spain have structured the first Cédulas deals to be issued under the Cédulas de Internacionalización legal framework designed to finance export finance loans. The deals are likely to be retained for central bank repo purposes and emerge amid a huge expansion in retained covered bond volumes after the European Central Bank recently cut repo valuation haircuts.