Spain

European credit markets, led by the banking sector, have seen risk escalate over the past several weeks with the Markit iTraxx Europe Main index seeing its spread widen to the highs of June 2013. One bright spot however, has been the region’s sovereign credit, which has largely steered clear of the contagion that developed in the corporate market.

Spanish renewable energy company Abengoa has asked lenders to sign a new credit facility as its March 28 deadline to avoid bankruptcy looms ever closer, but an accord appears elusive.

The widening spreads between core and periphery eurozone government bonds may lead some issuers to hold back from bringing deals, say bankers.

ArcelorMittal on Friday announced the sale for €875m of its 35% stake in the Spanish car parts supplier Gestamp Automoción to the Riberas family, who are yet to disclose details of how they will finance the purchase.

Caixabank issued its largest Cédulas in five years on Monday. It was also the biggest since 2014 and enticed more investors than any Spanish deal in three years.

Spain cut yields but printed at the lower end of its size target at a long end bond auction on Thursday, although bankers are confident that there would be demand if the sovereign chose to bring a long dated syndicated deal.

Spanish real estate firm Merlin Properties does not plan to rush its bond market debut, despite having hired Moody's and Standard & Poor's to provide credit ratings.

Italy is set to benefit from a Bank of Japan-induced rally in eurozone government bonds late last week after mandating for a 30 year benchmark on Monday — and bankers suggest Spain could follow with a similar deal.

Caixabank has become the fourth Spanish bank to tap the covered bond market this year with its largest Cédulas in five years. That four borrowers have launched similar sized deals of around €1.5bn so far this year suggests volatile market conditions are causing banks to frontload their funding.

Last year the Markit iBoxx Euro Banks index was one of the outperforming bond sectors in Europe having returned 1%. The index, which is largely made up of bonds issued by European banks, even managed to outperform defensive sectors such as healthcare and utilities, while Europe’s regulatory oversight and relaxed monetary conditions kept market confidence in check.

Catalonia’s new pro-independence government wants to negotiate with Madrid on the basis that it will take on 11% of the Spanish national debt, GlobalCapital can reveal. That would raise Spain’s debt-to-GDP ratio at a stroke from 99% to 111%, write Victor Jimenez and Craig McGlashan.

Earnings at Santander matched market expectations, but analysts argued that fully provisioning losses on its Abengoa exposures would have taken the bank to a fourth quarter loss.