Spanish Sovereign

Ireland wiped nearly 20bp from its 10 year funding costs at an auction on Thursday, printing €750m of March 2024 paper.

The smart money is on record low funding costs at a pair of auctions in the eurozone periphery on Thursday, as the region’s sovereign yields fall further on a seemingly unstoppable move downwards.

This week's scorecard covers the funding progress of sovereign issuers, with Belgium, Ireland, Netherlands and Portugal all over the halfway mark on their programmes for the year. Next week's scorecard will deal with European supranationals and agencies.

Spain stamped down its funding costs by 20bp-30bp as it slightly overshot its maximum €5.5bn target at an auction on Thursday. The drop in yields was evidence of a recent strong run for eurozone peripheral sovereigns’ debt, which some analysts believe is the result of investors’ expectation that the European Central Bank could soon start quantitative easing. Elsewhere, Italy kept yields near euro-era lows at an auction of two year zero coupon paper and outlined its auction business for next week.

A busy week of auctions in the eurozone periphery received the best possible start as yields fell on expectations that the European Central Bank will introduce quantitative easing to the currency bloc — sending five year Spanish yields below those of US Treasuries. But despite that sentiment also extending to Greece’s secondaries, bankers warned that the country would be foolhardy to come with a much expected deal this month.

Ireland's return to bond auctions last month helped the sovereign reach nearly 60% of its funding target for the year. Across the Irish sea, the UK started its financial year with a £2.577bn auction - and a reduced funding target of £128.4bn.

Spain’s 10 year borrowing costs fell on Thursday for the eighth auction in a row — a record stretching back to June. The sovereign also sold five year paper at its lowest yield since the introduction of the euro.

The Autonomous Community of Galicia’s first syndicated bond for four years went exceptionally well for the returning issuer. It drew a more than doubly oversubscribed book and tightened pricing by several basis points during the bookbuild.

The Autonomous Community of Galicia is set to print its first syndicated bond for four years this week, after mandating banks for a seven year euro benchmark on Monday.

Spain auctioned five year debt at the lowest yield on record for the second time this month, while its 15 year yields tumbled to 2005 levels on Thursday.

Spanish regional issuers will find it hard to print private placements in the coming weeks as their spreads against Bonos compress, according to medium term note dealers.

Spain’s 10 year yields dropped for the seventh auction in a row on Thursday — a record stretching back to July 2013 — as peripheral sovereigns showed they were fully decoupled from emerging market wobbles during the week.