Spanish Sovereign

The Kingdom of Spain hopes to print more benchmarks before the half year mark if market conditions permit, a Spanish treasury official has told SSA Markets. The sovereign expects to raise a volume in the middle of its €105bn-€121bn 2013 target.

The Kingdom of Spain exceeded its maximum target at a bond auction on Thursday morning, following hot on the heels of its return to syndicated dollar issuance on Wednesday. The Iberian sovereign had targeted a maximum of €4bn but placed just over €4.2bn.

Spain priced on Wednesday its first dollar benchmark since 2009. The deal confirms what some senior SSA bankers have suspected has been the case for a few months —that peripheral Eurozone borrowers have more than adequate market access in dollars despite the ups and downs of the ongoing sovereign debt crisis in Europe and its associated political turmoil — and that the market for dollar issuance by this borrower group is now reopened.

The Kingdom of Spain has made great strides towards regaining full market access by issuing its first dollar bond since September 2009, a step that may well encourage Ireland and Portugal back into the dollar arena to capitalise on US roadshows held in the last couple of months.

Spain is unlikely to suffer from uncertainty over the political future of one of its peripheral eurozone contemporaries when coming to auction later in the week, according to analysts.

Fears that slush fund allegations embroiling the Kingdom of Spain’s ruling political party could derail the country’s capital market recovery were allayed on Thursday as the Spanish Treasury confirmed plans for a roadshow in the US next week hosted by Citi and Deutsche Bank. A Treasury official told SSA Markets the roadshow was not deal related, but bankers predict that a dollar bond may not be too far off for the sovereign.

Italian yields plunged across the maturity curve at auctions this week and other peripheral eurozone issuers are expected to record similar results in early February, analysts said on Wednesday.

The football club Real Madrid have for more than a decade been synonymous with a spend now, worry later strategy that has led to short term success at the expense of long term stability. The team’s home region is taking a similar approach to its funding, setting an alarming precedent for other issuers in the eurozone periphery.

The Autonomous Community of Madrid’s decision to complete all of its 2013 funding in one fell swoop on Wednesday may have left it with a higher than necessary cost of funding, warned bankers on Thursday. With the rally in the eurozone periphery showing no signs of abating, a more staggered approach to funding could have saved the issuer precious basis points.

The Autonomous Community of Madrid followed hot on the heels of Spain’s 10 year, which was priced Tuesday, with a five year benchmark and a hefty private placement.

Almost €23bn of demand for the Kingdom of Spain’s new 10 year line has proved without a shadow of a doubt that the country has full market access, laying to rest the dire prognoses endemic at the end of 2012 that Spain would be forced to seek a bailout early this year.

The Kingdom of Spain made a return to syndication on Tuesday with a €7bn 10 year benchmark. Any bad memories of volatile patches of last year — where a bailout looked nigh on inevitable — looked to have been erased by a blistering book build process where orders grew to more than €17bn in less than an hour.