Spain received more than 29 billion euros ($31.5 billion) of orders for its first bond sale of the year, showing that investors are shrugging off the political upheaval gripping the nation.
The government was said to have sold 9 billion euros of 10-year securities in a deal that Kim Liu, a fixed-income strategist at ABN Amro NV, described as “very good.” The response bodes well for a week of heavy issuance of euro-zone debt, with Spain itself due to offer as much as 5 billion euros of bonds with maturities up to 2023 on Thursday.
“Despite any political jitters, the Spanish treasury has sold a 10-year deal at competitive terms,” ABN Amro’s Liu said from Amsterdam. “The deal was likely supported by a wide and diversified investor group.”
Spanish bonds haven’t, though, been immune to the political crisis that saw the Catalonia region form a separatist government on the weekend. The 10-year yield premium over Italian debt has been widening since early December, and jumped to a two-month high of 0.22 percentage point on Tuesday as investors made room for the new offering.
The main reason Spain’s bonds have underperformed Italian debt is “political risk,” Liu said. “The relative value of this new 10-year deal has drawn investors who are willing to bear that risk for the time being.”
The yield on Spain’s existing 10-year bond rose three basis points, or 0.03 percentage point, to 1.83 percent as of 4:05 p.m. London time, after climbing nine basis points on Monday. The price of the 2.15 percent security due in October 2025 fell 0.25, or 2.50 euros per 1,000-euro face amount, to 102.86.
When the nation sold 10-year bonds via banks in January 2015, the size of the deal was the same but the securities were priced to yield 1.656 percent.