(Adds background, quotes, deal details)
By John Geddie
LONDON, Jan 22 (IFR) - Spain smashed the record for the most
amount of orders placed for a European government debt sale on
Wednesday, when it priced a new EUR10bn 10-year bond, the
country's largest ever issue.
Over 400 investors placed nearly EUR40bn of orders for
Spain's new bond sold via a syndicate of banks, beating a record
set by Greece back in 2010, and illustrating the frantic
appetite that yield-starved investors have shown for peripheral
paper in the first weeks of this year.
"Both in terms of size and number of accounts, the interest
in this deal is massive," said Philip Brown, head of public
sector origination at Citigroup, one of the banks managing the
Lead managers Barclays, BBVA, Citigroup, Goldman Sachs,
Santander and Societe Generale initially marketed the bonds at
mid-swaps plus 185bp area, but quickly revised guidance to plus
180bp area after EUR22bn orders where placed in the first 30
minutes of the sale. The final spread was set at plus 178bp as
interest continued to grow.
The order book for the deal tops the EUR25bn of interest
Greece collected for a five-year bond back in January 2010, but
falls short of the EUR44.5bn of orders placed for the European
Financial Stability Facility's inaugural five-year sale in
Spain's new deal easily beats its previous 10-year bond
sales in 2009 and 2012 which raised EUR7bn each, putting the
country well on its way to issuing EUR133.3bn in medium- and
long-term bonds this year, up from EUR128.4bn last year.
The spread on the new bond, maturing in April 2024, was set
at mid-swaps plus 178bp, with a coupon of 3.8% and a yield of
Spanish borrowing costs hit their lowest levels since 2006
on Tuesday, and remain hovering around these lows. The current
Spain 10-year benchmark touched 3.65%, a yield not seen since
Spain was Triple-A rated by all three main credit agencies.
The strong momentum created by Wednesday's deal has seen the
country's 10-year borrowing costs tighten over 7bp to Germany
during the session. The spread reached around 190bp, although
some investors expect it to hit 150bp over the course of the
coming quarter, heading back to levels not seen since 2010.
Spain, rated Baa3/BBB-/BBB, emerged from a painful recession
in the third quarter of last year, prompting rating agencies to
take a more optimistic outlook on the country. Fitch lifted its
outlook from negative to stable in early November, and both S&P
and Moody's swiftly followed suit.
"Up until the final quarter of last year it was prudent not
to hold Spanish paper because according to the credit ratings
agencies there was still the risk the country could drop into
sub-investment grade territory, and there would be forced
sellers," said Sandra Holdsworth, investment manager for global
government bonds at Kames Capital.
"Now all those investors are coming back, and despite yields
being significantly lower, risk appetite has significantly
Like elsewhere in the periphery though, investors' eagerness
to seek profit from higher yielding peripheral European debt may
override nagging concerns around economic fragility in some of
the region's most troubled countries.
Ireland, for instance, won nearly EUR14bn of interest for a
new 10-year bond in early January despite concerns about its
debt-to-GDP level, which remains one of the highest in the
Portugal also collected orders of EUR11bn for a tap of a
five-year bond, despite still being in the throes of an EU/IMF
In Spain, the biggest problem is unemployment, which still
stands at a staggering 25%, while its growth forecast for this
year is a fairly tepid 0.7%.
(Reporting by John Geddie; editing by Alex Chambers, Helene
Durand, Julian Baker)