Spanish Sovereign

Spanish government bonds sold off on Monday as the country enters a period of political uncertainty following Sunday’s election.

Investors appear to be confident that a Spanish general election this weekend will return a market-friendly result, with the sovereign enjoying much tighter spreads to its nearest comparable than earlier in the year — despite its yields rising at a debt auction this week.

As the Spanish populace geared up for a general election over the weekend, the Spanish Treasury wound down its 2015 auction programme with a sale at the lower end of its target volume range on Thursday.

Spain shaved around 30bp from its long end borrowing costs on Thursday — just a few hours before its yields jumped after the European Central Bank disappointed market participants expecting a strong dose of monetary easing.

The European Central Bank has given its strongest hint yet that it could introduce more monetary easing in December, as eurozone periphery issuers enjoyed falling yields and strong demand.

Spain auctioned three year debt at a record low yield on Thursday, but its borrowing costs may have further to fall after the European Central Bank gave a strong hint that it could introduce more monetary easing.

Cores, the agency which stocks Spain’s fuel supplies, printed its first syndicated bond in over a year on Wednesday. French investors propelled the international demand for the paper.

Public sector borrowers are putting the final touches to their funding programmes for the year amid stable market conditions, but there are few signs that any will pre-fund for 2016 in large size.

Political risk appeared to be influencing investors’ decision making on Monday, as a trio of eurozone periphery sovereigns underperformed their peers in secondaries. But there was better news for Cyprus, which more than halved its one month borrowing costs at an auction.

Spain cut its long term borrowing costs at a debt auction on Thursday, as it hit the middle point of its target volume range.

A rare public sector issuer from the eurozone periphery could bring some euro supply late in the year after hiring banks on Tuesday to run an investor roadshow.

Spain’s nine month borrowing costs dropped to a euro-era low of minus 0.6bp at an auction on Tuesday, amid signs of investor pushback against negative yields.