Spain mulling 30-year syndicated bond in coming weeks

 

The Kingdom of Spain is expected to return to the syndicated market in the coming weeks for a new 30-year line, according to bankers covering public sector debt, though some believe recent volatility could make it a tricky trade.

The sovereign, rated Baa2/BBB+/BBB, is currently monitoring the market, four SSA bankers said, although a deal is not likely until the second half of May.

"I think they need to give the market some time to settle down from the volatility and the Portugal sale. There are also some bank holidays to navigate, so my advice would be to look for a deal in the second half of the month," said one syndicate official.

Spain is believed to be working on a 30-year maturity, the bankers said, as it has not issued in that part of the curve for more than 18 months and is looking to term out large amounts of debt taken on in recent years.

The ECB's quantitative easing programme has flattened sovereign curves, making long-dated issuance attractive for peripheral countries in particular.

However, events this week caused some bankers to suggest a rethink on this plan.

"Duration bonds across the eurozone have widened massively over the past two weeks, and Portugal suffered because of this. If you're Spain and have waited nearly two years to do a 30-year, why would you want to do it now?" said a second SSA banker.

Portugal this week struggled to gain traction on a syndicated reopening of a 30-year bond, and only managed to raise EUR500m despite offering a 20bp new issue premium. It had much more success with a EUR2bn tap of a 10-year deal.

The second banker suggested a 10-year note, but Spain on Thursday announced that it would issue a new 10-year via auction in the week starting May 4, making this an unlikely option for the syndicated trade.

GREEK VOLATILITY

The Greek debt crisis has caused some volatility in peripheral Europe, despite the best efforts of the ECB to ring-fence the issue.

However, bankers said at the start of the week that the market could get shakier still if the troubled nation heads towards a default or an exit from the single currency, so this could be the right time for the likes of Spain to issue a bond.

The Spanish treasury itself does not see the volatility as an impediment.

"Currently, market conditions are acceptable and we can fulfil our issuance plans as normal: interest rates have rallied strongly and are still within the levels most expected at the start of the year," Pablo de Ramon-Laca, head of funding and debt management at the Spanish Treasury, told IFR on Monday.

"Political events have not affected our funding plans in the way they may have done in the past. The current volatility in the market is manageable," he said.

He declined to comment on Spain's specific plans for issuance.

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