* Spanish yields rise after 10-yr syndication announcement
* Small selloff not a sign of panic over success of sale
* Bunds driven lower by optimism over U.S. debt ceiling plan
By William James and Marius Zaharia
LONDON, Jan 21 Spanish bond yields rose on
Monday after Madrid announced plans to launch its first new
10-year benchmark since November 2011, but the limited scale of
the reaction suggested the new issue would succeed.
Spain, which narrowly avoided being sucked into the euro
debt crisis last year, was testing the market for 10-year bonds
via syndication and appointed six banks to underwrite the deal
according to IFR, a Thomson Reuters service, which cited sources
at the lead managers.
The announcement initially sent 10-year Spanish bond yields
to 5.16 percent, up around 6 basis points on
levels before the news, but the selloff soon slowed.
"There's obviously been a bit of pressure but I think it's
mainly dealer led. I haven't seen real money accounts coming
through and selling," a trader said.
"If anything I expect a lot of end investors are just
working out how it's going to be priced and how much they can
afford to buy."
The sale represents a big step forward for Spain in tackling
its tough funding requirements for this year. By issuing a new
long-term bond for the first time since November 2011, Madrid
will be hoping to show the funding problems that dogged the
country in 2012 have eased.
"The market will closely scrutinise the volumes and the
pricing and until that is done question marks remain but the
positive for now is that the market hasn't sold off in a
disorderly fashion just on this headline," said Michael Leister,
senior strategist at Commerzbank in London.
"Arguably that might not have been the case in the summer
German Bund futures fell 37 ticks on the day to
142.95 as U.S. Republican politicians proposed an extension of
Washington's federal borrowing authority that may stop the
United States reaching a self-imposed debt limit.
But with no agreement yet on the proposal, analysts said
room for a further rise in yields was limited, especially since
they were trading close to the top of their recent range.
The 10-year Bund yield rose 3 basis points on
the day to 1.53 percent. Thin volumes due to a U.S. holiday were
exaggerating the rise in yields, traders said.ž
Among market participants there was little evidence of any
concerns about German Chancellor Angela Merkel's Christian
Democrats narrowly losing an election in Lower Saxony.
Merkel remains favourite to win a third term in a general
election in September, but the centre-left majority in the
parliament's upper house means the opposition can block major
legislation and initiate laws themselves.
"All support measures for the (euro) countries in the south
have also been supported by the opposition," said Norbert Wuthe,
rate strategist at Bayerische Landesbank, referring to the
parties opposing Merkel.