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Last updated: February 20, 2013 1:11 pm
Spain sold a $2bn dollar-denominated five-year bond sale yesterday in an effort to capitalise on the robust appetite for higher yielding bonds among investors.
The bond was priced at about 300 basis points above mid-swaps, a funding benchmark, and bankers on the deal said it was well-received by investors outside the US as well.
Madrid has been the biggest beneficiary of the European Central Bank’s promise to intervene in the bond market of embattled euro countries that sign up to a rescue package. The country has managed to avoid asking for help with the promise of ECB aid proving enough, so far, to quell its borrowing costs.
“It was a very good trade,” said Demetrio Salorio, global head of debt capital markets at Société Générale, one of the lead banks on the deal. “It has been important for Spain to prove that it isn’t dependent just on the euro investor base.”
Spain’s euro-denominated 10-year benchmark bond yield dipped slightly to 5.16 per cent by late afternoon in London, the lowest since it was issued in late January.
The January sale raised €7bn and attracted orders of almost €23bn, much of it from foreign investors, underscoring the sharp shift in international investor attitudes towards Spain and the rest of the eurozone periphery.
Bankers on yesterday’s dollar deal primarily targeted “mainstream” US funds that focus on investment grade bonds, but in the end two-thirds was sold to European and Middle East investors.
The total order book came to $3.1bn, and included fund managers, banks and central banks, according to bankers.
“Spain tapping the dollar market is a good sign,” said Tanguy Le Saout, head of European fixed income at Pioneer Investments. “[The deal] is opportunistic, but good.”
Still, many investors are wary of the European periphery, pointing to the difficulty of bringing public deficits and ballooning debt burdens down while economies are contracting.
Mariano Rajoy, the Spanish premier, yesterday told the country’s parliament that the government had managed to bring its budget deficit down to 7 per cent of annual economic output last year.
Société Générale, Citi, Barclays and Santander managed the deal on behalf of the Spanish treasury.
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