Spanish Sovereign

Spain pushed its borrowing costs to record lows at auction on Thursday, amid hopes that Greece was about to come to an agreement with its creditors over an extension to its bail-out package — hopes that were quickly dashed.

Madrid mandated banks for a euro deal on Tuesday, with SSA bankers confident that Greece’s discussions with creditors will not impact other eurozone periphery borrowers.

The fading hopes of a deal being reached between the Greek government and its international creditors on Monday failed to dent sentiment for the rest of the eurozone periphery ahead of a series of auctions — and a rumoured syndication — later this week.

Spain took full advantage of the quantitative easing driven flattening of the euro curve at auction on Thursday, as it pushed its 15 year and 30 year borrowing costs below 2% and 3% for the first time since the creation of the euro. But there were signs of ebbing demand, as the sovereign failed to hit even the midpoint of its volume target.

After a benign start to the week for sovereign and agency borrowers in the eurozone periphery in the aftermath of the Greek general election — allowing several issuers to print paper at record breaking low yields — the fears of a political standoff between the new Hellenic government and its European peers led to a softer tone mid-week. But public sector bankers remain confident that Greece’s problems are, in the short term, its own.

Italy and Spain showcased what can be achieved in the new world of eurozone sovereign quantitative easing, as they hit record low yields at their first auctions since the European Central Bank announced its QE programme last week. With two more days of auctions ahead of it, Italy could break even more records this week.

The European Central Bank’s larger than expected quantitative easing programme provided a bulwark to eurozone periphery sovereign yields outside Greece on Monday, boding well for a string of auctions this week. The countries’ set to auction this week are enjoying yields close to the record lows they hit after the QE announcement at the end of last week, despite a clear win for anti-austerity party Syriza in the weekend Greek election that pushed that country’s yields much higher.

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The lowest ever coupon on a Spanish 10 year euro benchmark was not enough to deter investors from piling into an April 2025 syndication from the sovereign on Tuesday, with books more than twice subscribed.

SSA bankers lauded Portugal on the timing and execution of a dual tranche benchmark deal on Tuesday, as investors ploughed into the offering. Elsewhere, Spain revealed its syndication plans for 2015 and Italy broke records at the long end of the curve.

Portugal is set to visit the 30 year part of the curve for the first time since 2006, after mandating banks for a rare dual tranche deal on Monday. Italy and Spain are also rumoured to be looking at euro deals this week, which is already busy with auctions in the eurozone periphery.

Eurozone periphery yields dipped on Thursday after the latest sovereign bond buying wink from European Central Bank president Mario Draghi. That bodes well for Italy, which has a pair of auctions lined up for next week, while Spain was able to cut its long dated funding costs at auction on Thursday.