Spain

Italy has sparked a busy week for the eurozone periphery by cutting its borrowing costs at an auction of short term debt.

Following the announcement of a rating upgrade of the Kingdom of Spain by Standard & Poor’s on Friday, several Cédulas programmes are likely to be upgraded. But since no regulatory rating thresholds is likely to be broken, spreads should be unaffected, said Commerzbank analysts on Monday.

Santander fell victim to market spasms this week, pulling a dollar trade amid extreme volatility.

Swedish Covered Bond Corp (SCBC) and Bankinter issued €750m covered bonds this week, but after record issuance, their limp receptions may cause others to postpone funding plans.

Spain’s borrowing costs dropped to their lowest levels since spring at an auction on Thursday, rounding off a week where the country outperformed its nearest peer in secondary markets.

Bankinter repriced the Cédulas market at least 5bp wider, and its own curve by around 15bp wider on Thursday, with a benchmark five year deal. But with the longer term outlook set to improve, the transaction is expected to have tremendous performance potential.

Spain is enjoying a strong warm-up for a debt auction this week, as its yields fell faster than its eurozone periphery peers following a Catalonian election where independence parties won just under 50% of the vote.

Banco Popular Español (BPE) and Caja Rural de Castilla-La Mancha (CRCLM) issued Cédulas this week that were barely subscribed and relied heavily on demand from the European Central Bank.

The tug of war over the Spanish renewable energy company Abengoa ended on Thursday, with the founding family caving in to at least some of its banks' demands, in return for their underwriting a €650m capital increase.

Banco Popular Español (BPE) returned to the covered bond market for the third time this year to issue a six year deal on Wednesday. After the relatively weak reception Caja Rural de Castilla-La Mancha (CRCLM) received for its similar six year on Tuesday, BPE did well to raise €750m.

Spain’s sold short term debt at the lower end of its size target on Tuesday, just a few days before a crucial regional election in the country.

Deals issued on Tuesday from Westpac New Zealand and Spain's CRCLM failed to gain much traction despite attractive pricing. Another from Bawag, its first in three years was more comfortably oversubscribed.