Spanish Sovereign

Spanish yields jumped around 20bp at an auction of three year, five year and 15 year debt on Thursday, as investors — having poured into eurozone periphery debt with gusto over the last year — digested comments from the US Federal Reserve and weak overnight data from China.

Spanish three month yields rose for the first time in months at auction on Tuesday, ahead of a longer dated debt sale later in the week.

The EFSF has mandated three banks for a 10 year benchmark deal, which, should it go well, will wrap up a stellar week for borrowers associated with Europe’s sovereign funding crisis. The bail-out vehicle will follow a thumping €7bn sale in 10 years from Spain on Tuesday and what looks to be a successful €6bn 30 year sale from Italy on Wednesday.

Italy was set to price large 30 year syndication on Wednesday afternoon, in yet another stellar result for a peripheral European name this month. The sovereign wasted no time in announcing the trade after Spain received more than €21bn of orders for a 10 year deal, resulting in a €7bn print on Tuesday.

Spain issued its second €7bn 10 year benchmark of 2013 on Tuesday, and again, the deal attracted over €20bn of orders. The trade demonstrated the extent of the country’s market access as investors scramble for the few credits left paying any sort of respectable yield. Even so, the domestic allocation on this benchmark was higher than the comparable deal done in January.

Spain was set to print a blow-out 10 year trade as SSA Markets went to press. Investors, starved of yield in better rated assets, flocked to the Iberian sovereign’s latest syndication placing over €21bn of orders. The trade will ape the borrower’s first triumphant syndication of the year.

Italy has mandated five banks for the 30 year syndication it has planned to bring since the beginning of the year. Initially delayed by the inconclusive Italian election result at the end of February, the sovereign will have seen the conclusion of that saga at the end of April as well as syndication successes by Spain on Tuesday and Portugal last week as reasons to believe the trade may now work.

The great eurozone periphery yield plummet showed no signs of flagging on Thursday, as Spain auctioned medium to long term debt at levels not seen since 2009. Italy is next up on Friday with a bill auction that analysts expect to be a similar success.

Both Spain and the European Financial Stability Facility could follow Portugal’s triumphant return to the capital markets with a 2024 bond on Tuesday with their own 10 year deals next week. Portugal, meanwhile, plans to build its capital markets presence this year with its first auctions of medium to long dated debt in two years.

Portugal was set to pick up 10 year paper on Tuesday in its first new syndication since it received a bail-out in 2011. Heavy demand enabled the sovereign to set the size at its maximum target.

Spanish regional credits — including super rare issuer Institut Català de Finances — took advantage of their sovereign’s plummeting yields to place a series of privately placed deals this week.

A raft of positive news for the eurozone periphery helped Spain auction short term debt at record low yields on Tuesday and set Italy up nicely for debt sales later in the week.