Spanish Sovereign

Spain will look to complete a capital market comeback this week when it issues a 10 year euro benchmark. The country had been written off as a bailout certainty late last year once the European Central Bank had announced its Outright Monetary Transactions scheme which almost seemed to have been concocted with assisting the Iberian sovereign in mind. But on Monday afternoon, after months of denying it would ask for assistance, the country mandated five banks to lead manage its first new benchmark in almost a year.

The snow is falling in London but the chill over the eurozone periphery has lifted. Italy and Ireland have both returned with deals, a Spanish syndication could be imminent and there is even chatter of Portugal plotting a comeback.

The Kingdom of Spain had cause to celebrate on Thursday as its second bond auction of 2013 passed off without a hitch. But murmurings over when the sovereign would come with a syndicated deal intensified as figures showed the borrower has been less quick off the mark than it was last year.

The Kingdom of Spain wiped more than 100bp off its short term funding costs on Tuesday, shaking off a jitter in its secondary pricing and positioning itself for its second bond auction of the year later this week.

The triumphant return of Italy to the syndicated market with a 15 year conventional bond and a successful bills auction by the Kingdom of Spain [see separate story] has given another massive boost of confidence to peripheral Europe, already buoyed by Ireland’s €2.5bn tap issued last week.

Instituto de Crédito Oficial rode on the coattails of a peripheral eurozone rally to bring in €700m from non-Spanish investors this week.

Bankers have demanded that the Kingdom of Spain grasp the bull by the horns and launch a benchmark as soon as possible, as the sovereign basked in the glow of a spectacular auction result and a thumping tap by the Republic of Ireland on Tuesday.

Natixis lead managed a deal for the Spanish region of Aragon on Tuesday. The deal is the latest in a recent spate of Spanish regional issuance.

The Kingdom of Spain topped its own size expectations in its last debt sale of the year on Tuesday — while Italian and Spanish government bond yields took a double digit dive.

Spanish issuers rode on the back of a well received auction for their sovereign and diminishing concerns over eurozone reform to print a series of privately placed taps on Thursday. The relatively small size of the Spanish auction had played a crucial role in allowing the credits to print, said dealers.

The Kingdom of Spain rounded off a difficult year for bond issuance by selling more than its targeted amount at an auction on Thursday, including the first debt from a periphery eurozone issuer in the 30 year bracket in 2012. The Republic of Italy also hit all its targets in its penultimate bond auction of the year.

Spain announced its borrowing plans for 2013 on Tuesday, including plans for a very large increase in its net issuance of bills. Strategists are concerned that Spain will struggle to successfully execute its borrowing programme without official assistance, and that the emphasis on bills could lead to refinancing problems in 2014.