* Spain mandates banks for first 31-year bond in four years
* Italy looks to markets for 7-year issue -IFR
* Telefonica, Santander, Indra, Gas Natural issue debt
By Paul Day and John Geddie
MADRID, Oct 8 The Madrid and Rome Treasuries and
some of Spain's largest firms moved to raise funds on Tuesday,
taking advantage of a benign phase in debt markets as optimism
for Europe's economic recovery grows and risk appetite picks up.
Southern Europe has felt the worst of the five-year euro
zone debt crisis with sovereign debt yields in Spain and Italy
reaching record highs through 2012, while Spanish corporate
financing was almost entirely paralysed, notably for its
Sovereign financing costs have dropped steadily since the
summer of last year after European Central Bank President Mario
Draghi said he was prepared to do all it took to defend the euro
and as euro zone economies emerged from recession.
On Tuesday, the Spanish Treasury mandated banks for a
31-year bond, the first of such a long maturity since 2009,
while sources at lead banks told Thomson Reuters news and
financial service IFR that Italy was marketing a new seven-year
Spain's leading companies also turned to fixed income, with
its largest bank Santander, utility Gas Natural
and telecommunications giant Telefonica all in
the debt market on Tuesday, IFR reported.
"This is about falling yields and it seems to be good
timing. If there's no obvious risk element to come and
everything else lines up properly, then there doesn't seem to be
a good reason not to come to the market," said Michael
Michaelides, rate strategist at RBS.
The Spanish sovereign bond would probably be issued on
Wednesday, a source at the Treasury said, while an Economy
Ministry source said between 2 and 3 billion euros ($2.71-$4.07
billion) was targeted.
"This reflects the stability of the market, improved
confidence in Spain and investor interest in long-term (debt),"
the Treasury source said.
Santander Consumer Finance marketed a senior unsecured bond,
after finalising a deal to buy 51 percent of the consumer
finance business of Spanish department chain El Corte Ingles on
The deal was the latest sign of growing confidence that
Spain's recession-plagued economy is emerging from the mire.
For a Breakingviews column:
Spain's Treasury has already reached some 86.2 percent of
its 2013 medium- and long-term borrowing target, making the most
of some of the country's lowest financing costs since before the
economic crisis began in 2008.
Spanish and Italian bond yields rose on Tuesday as lack of
progress in resolving the U.S. budget stalemate made investors
wary of exposure to riskier assets.
But the U.S. budget deadlock was still having only a limited
effect on Spanish debt, analysts said, with benchmark yields
well below those recorded last year.
The economy ministry source suggested that situation was
unlikely to affect the plans to issue the new long-term paper.
"I've seen a lot of talk, and movements in the market, but
my impression is that if one thing the Americans have a clear
about is that is how markets work," the source said. "They know
they have time to react, and I don't see a problem."
Potential risk scenarios in Europe confronting investors
include discussions over banking union in the Eurogroup later in
October, details of a European Central Bank financial sector
stress tests early next year and talks on Greece in December.
"After the Italian risk has seemingly calmed down, what's
the upside of waiting?" RBS's Michaelides added.
As market conditions eased for Spain, which at the height of
crisis seemed doomed to join Greece, Portugal and Ireland in
applying for sovereign aid, it has also floated the idea of
issuing a 50-year bond in coming months, a Treasury source said
Spain mandated Barclays, BBVA, BNP Paribas, CaixaBank,
Citigroup and Santander GBM for the new syndicated reference
bond maturing Oct. 31, 2044, IFR said.
Credit Agricole CIB, Credit Suisse, HSBC and UniCredit have
been mandated to sell the new Italian bond, maturing May 1 2021
and likely to be issued on Wednesday, IFR reported citing a lead
(Reporting By Paul Day; Editing by Fiona Ortiz, John