Spanish Sovereign

Issuers should take the plunge. Those considering whether or not it is wise to pre-fund should bite the bullet and go for it.

Spain exceeded its fund raising target in an auction of three and 10 year debt on Thursday, a week before Moody’s is expected to deliver its verdict on the sovereign’s rating and amid intense speculation that Spain will soon ask the ECB to begin buying its bonds.

Instituto de Crédito Official (Ico) answered critics of its public debt return by attracting domestic demand for a €100m tap and revealed further private deals aimed at domestic and international investors could soon follow.

Instituto de Crédito Official is angling for a public issue this month as peripheral eurozone spreads scream in following the unveiling of the ECB’s latest bond market bazooka on Thursday.

Instituto de Crédito Official (Ico) answered critics of its public debt return by attracting domestic demand for a €100m tap and revealed further private deals aimed at domestic and international investors could soon follow.

Just as we enter one of the busiest months of the new issuance calendar in some of the most volatile markets in history, Moody’s could be about to junk Spain. Ratings agencies have often been followers rather than drivers of the action during this sovereign crisis. But this time round, a ratings cut could push a Spanish bailout from being a likelihood to a certainty.

The Spanish regions of Valenica and Murcia have requested a bigger bailout from Spain’s central government than expected. Spain’s problems are only escalating as Moody’s is expected to downgrade the sovereign to junk status which could further push the country’s borrowing costs.

Italy raised over €7bn of long-dated debt on Thursday, its first attempt at accessing duration funding since a strong rally over the summer. But a sell-off in peripheral bonds darkened the mood and doesn’t bode well for Spain’s auction next week.

Catalonia, the Spanish region worth 20% of the country’s economy, asked the central government on Tuesday for financial aid. A bail-out will strain Spain’s coffers further and is likely to deter more investors from wanting to buy its debt, bringing Spain closer to the prospect of an EU bail-out.

Spain slashed its borrowing costs in a treasury bills auction on Tuesday, underlining an improvement in sentiment towards periphery credits over the summer. Italy is likely to meet with similar strong demand when it auctions T-Bills later this week, said analysts.

The only thing that changes with each phase of the sovereign debt crisis in Europe is that the numbers seem to get bigger. After a week of expectation, the ECB fell short on Thursday and Spanish yields puked once more.

Spain issued €3.13bn of new bonds on Thursday morning ahead of the European Central Bank suggesting that it would not be stepping into help Spanish yields with a resurrection of its Securities Markets Programme (SMP) anytime soon.