Spanish Sovereign

Spain should have little difficulty tapping a trio of bonds at auction on Thursday, said analysts, despite its paper suffering a sell off on Monday and a busy few days of data releases and announcements.

The sovereign funding scorecard expands beyond Europe this month with the addition of Japan. The country has a whopping ¥156.8tr (€1.2tr) target this year but is well on track having raised ¥136.2tr so far.

Spain basked in the afterglow of a freshly resolved US political crisis on Thursday morning, attracting bountiful demand and wiping basis points from its funding costs at auction. Other peripheral sovereigns with funding left for the year could also benefit, with the US breakthrough leading to a strong bid for eurozone paper, said analysts.

Spain sold 12 month debt at its lowest yield since April 2010 on Tuesday in a debt sale that should set it up well to auction longer dated debt later in the week.

A lack of progress on talks to raise the US borrowing limit could create rocky conditions for a Spanish bond auction later this week, analysts warned on Monday. While many commentators expect US politicians to reach a last minute deal, that may come too late for Spain’s debt sale.

Italy and Spain shrugged off suggestions that bringing new syndications this week would be too risky for peripheral sovereigns when they printed deals on Wednesday afternoon that attracted more than €10bn of orders apiece.

Two peripheral sovereigns mandated in the wake of the European Stability Mechanism’s debut on Tuesday, as market tone in euros remained strong despite the clock ticking on the US debt ceiling negotiations and the government still in shutdown. Italy mandated banks for a debut seven year benchmark while Spain hired for a 30 year syndication.

Spain and Italy are just some of the issuers weighing up their options of coming with a euro benchmark before the end of the year. Many will be tempted to wait until deadlock in the US government is resolved before attempting an execution — but precisely because there are so many potential political pitfalls on the horizon borrowers ought to be looking seriously at coming sooner rather than later.

Spain auctioned 10 year debt at its lowest yield in more than three years on Thursday, as markets calmed following the resolution of a political crisis in Italy. Italy will be keen to emulate Spain when it auctions debt next week.

Spain and Italy received a boost ahead of some upcoming auctions, as fears of an imminent Italian government collapse disappeared on Wednesday afternoon.

Spanish and Italian yields recovered in Monday afternoon trading as the latest political rumblings from Italy looked set to be defused, leading to more benign conditions for the sovereigns’ upcoming auctions this week and next.

Austria, Belgium, Finland and the UK were among the European sovereigns to add to their funding totals with benchmark deals this month.