* Demand for new syndicated issue at unprecedented 24 bln
eur -econ min
* Final orders due later on Tuesday; seen selling 7 bln eur
* Treasury draws strong demand, lower yields, at bill sale
By Paul Day
MADRID, Jan 22 Investors piled into Spain's new
10-year bond on Tuesday as the country made the most of renewed
appetite for debt from the euro zone's weaker economies, also
beating targets at a short-term auction.
The treasury's new benchmark - the first in more than a year
- had drawn estimated demand of around 24 billion euros ($32
billion), Economy Minister Luis de Guindos said, describing the
sum as unprecedented.
A government source close to the deal said Madrid would,
however, choose to sell no more than 7 billion euros, to leave
appetite in the market. Earlier the same source said it was
aiming to place 4 billion euros.
Spain, which has been at the sharp end of Europe's debt
crisis on concerns it cannot control its public deficit, also
looked to have trumped recent fundraising efforts by fellow euro
zone struggler Italy.
Rome sold 6 billion euros of a new 15-year bond on Jan. 15,
its first in two years, meaning both countries have already made
significant inroads into daunting 2013 funding programmes.
Using a strong syndicate for Tuesday's sale was "a good
excuse for Spain to show that they're not in trouble and don't
need a bailout," said Jo Tomkins, strategist at consultancy firm
Spain's budget gap is one of the highest in the bloc, in the
midst of a drawn-out recession and sky-high unemployment.
It probably missed its deficit reduction target for last
year but it remains largely on track with its economic
programme, the European Commission said in a report published in
Brussels on Tuesday.
Madrid's funding costs on international markets rose to
euro-era highs last July as traders demanded ever higher
premiums to hold the country's debt. Yields have since fallen
after the European Central Bank pledged to back struggling euro
zone states with bond purchases if needed.
Prime Minister Mariano Rajoy has resisted calls to apply for
European aid which would trigger the ECB programme as yields on
Spanish debt tumbled to more sustainable levels for the
Not including Tuesday's sale, Spain has already reached
around 9 percent of its 2013 issuance target, while Italy has
met around 10 percent of its funding.
The front-loading in part reflects concerns that political
tensions, especially surrounding Italy's upcoming elections,
could dampen the current market enthusiasm for the euro zone's
"I'm under the impression that the (Spanish) Treasury is
making the most of a benign market to increase its liquidity for
whatever comes in the future," economist at Cortal Consors
Estefania Ponte said.
In a further sign of the interest in peripheral paper, Spain
sold 2.8 billion euros worth of short-term debt, beating the
target amount for the auction and with average yields at their
lowest since March 2012.
At the auction, the yield on the 3-month bill fell to 0.441
percent, compared with a peak of 2.434 percent when market
tensions were at their height in July.
The final price on the 10-year syndicated bond was set at
midswaps plus 365 basis points, putting investor returns at
around 10 basis points above the current secondary-market yield
of 5.1 percent.
The Treasury last sold a syndicated bond in February 2012 of
its current 10-year benchmark with a 5.85 percent coupon. The
bond was introduced to the market Nov. 2011.
At 1206 GMT, 10-year Spanish yields were about
one basis point lower at 5.15 percent, while comparable Italian
yields also fell marginally to 4.20 percent.