Spanish Sovereign

Spain saw heavy demand for its 12 month paper at an auction on Tuesday, with its strongest bid to cover ratio since October. Despite yields rising to their highest level since February, the result is a sign that political worries in the country have failed to hurt its capital markets access, said analysts.

France passed its first test since losing its last triple-A rating on Friday, placing nearly €8bn of bills on Monday with just a slight increase in yields from a week ago. The sovereign is expected to sail through an auction of longer dated debt later on Thursday with similar ease, but a debt auction for Spain on the same day may be a tougher sell as investors digest the latest political scandal from the country, said analysts.

Spain, picked up €3.5bn of 15 year paper on Tuesday in a deftly executed trade that drew praise from SSA bankers away from the mandate.

Kingdom of Spain astonished SSA market participants on Monday afternoon, when it hired six banks to run a 15 year euro syndication, less than a week after fellow peripheral sovereign Portugal’s bond yields shot north of 8% on fears of a government collapse. The deal came on the same day as Bank Nederlandse Gemeenten (BNG) announced a 10 year deal with bankers also expecting a deal from the EFSF.

Spain hit its maximum €4bn target at an auction of three year and five year debt on Thursday, a result which — despite increased yields — showed the sovereign was not badly affected by concerns over the future of Portugal’s government.

Spain could be set for a tricky test on Thursday when it becomes the first peripheral eurozone sovereign to sell debt since a political fallout in Portugal led to a selloff of southern European debt.

Italy’s two year borrowing costs more than doubled amid turbulent markets at auction on Tuesday ahead of an even more daunting task on Thursday when it tests international interest with longer dated debt.

Belgian bond yields spiked sharply and short term French and Germany yields jumped at auction on Monday, a trend that is likely to affect other eurozone sovereigns preparing for a busy week of issuance in volatile trading conditions.

This week's funding scorecard focuses on some of Europe's key sovereigns. Next week's scorecard will offer an update on Spanish regions and gencies.

Spain’s 10 year borrowing costs rose at auction on Thursday as markets tumbled following news that the US Federal Reserve would start to wind down quantitative easing this year. But it was still able to overshoot its maximum €4bn target, despite the choppy conditions.

Spain’s six month and 12 month borrowing costs rose to their highest level since February at an auction on Tuesday, ahead of a sale of longer dated debt later in the week.

Spain recorded strong demand at a triple debt auction on Thursday but yields rose at the long end of the curve, in keeping with a sell-off in the sovereign’s secondary debt over the past two weeks.