Spanish Bond Auction Exceeds Expectations

By Published On: 10/23/2012 Read More »

Spain successfully concluded another round of bond auctions raising €3.53 billion, exceeding the target amount of €3.5 the country expected to raise, according to a report by the Bank of Spain.

The Spanish Treasury department sold its 6 month bills at an average yield of 2.023%, modestly lower from its September 25th bond auction which saw the yields at 2.213%. Meanwhile, the 3 month notes attracted 1.415% yield, up from 1.203% in September.

The 10 year bond yields increased by 8 basis points to 5.6% at the auction. The latest bond auction saw the 6 month securities getting more demand than the 3 month notes.

The economy continues to be in turmoil as latest reports saw its economy contract for the fifth consecutive quarter. The Spanish GDP dropped 0.4% in the three months through September, compared to the previous quarter, according to the Bank of Spain’s estimates released today.

Spanish bond have been declining as EU leaders failed to reach an agreement in regards to the Spanish bailout. Spanish Premier, Mariano Rajoy is clearly under pressure as he tries to manage the budget which is already 3 times the EU limit.

The Euro depreciated against the US Dollar, trading at $1.3031, down by 0.2%.

Rajoy continues to downplay the need for seeking financial assistance as latest downgrades from Moody’s lowered the credit ratings for Catalonia which happens to be the biggest GDP contributor to the country. Spain as a whole is also on the verge of being rated “junk” and with a negative outlook, the possibility of losing access to the debt markets is quite plausible.

Data from Eurostat which was released yesterday showed the Spain’s budget gap was at 9.4% of its GDP last year along with Greece.

Meanwhile, it is reported that billionaire Wilbur Ross expressed interest to purchase stake in Spanish banking assets. Ross’s WL Ross & Co. has in the past bought 10% of Bank of Ireland and buying a part of Northern Rock PLC by investing £350 million along with Richard Branson’s Virgin Money. It is learnt that the billionaire is in talks with representatives of Spanish banks in this regards.

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