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Spain to issue up to 5bn in bonds

Tue 6th Jul 2010

The Spanish treasury is expected to issue between 3-5 billion of a new benchmark 10-year bond via a syndicate over the course of the next few days, a financial source said.

Guidance was expected to be set at mid-swaps plus 200 basis points, IFR, a Reuters service, reported. Spain's previous 10-year issue back in January of this year was priced at close to 150 basis points lower.

"It's a routine issue. Such issues are usually between 3 and 5 billion ... and this is nothing out of the ordinary" the source commented.

On Monday of this week Spain named the banks to involved in the 10-year syndication as Barclays, BBVA, Caja Madrid, Credit Agricole, Deutsche and Santander.

A number of foreign investors have turned away from Spanish sovereign debt in the past two months over concerns that the country might require a Greek-style bailout, but officials have insisted on Spain's solvency and debt auctions continue to attract strong domestic demand.

The country needs to redeem a 5-year bond of 16.2 billion before the end of July, and the government has said it will meet the payment without any problem.

So far the Treasury has declined to comment on the 10-year benchmark until the transaction has been concluded. "The Treasury has over 20 billion in cash reserves which it has built up over the year to face this redemption. The July debt payment is not a surprise for the government and, obviously, it planned in advance" the source said.

When asked to confirm the reserve figure, Treasury secretary Carlos Ocana saicommented, "The Treasury will meet all the state's spending needs this year."

Spain booked solid demand of over 12 billion for an issue of 5 billion euros in a 15-year benchmark at mid swaps +85 basis points on February 17th.

The last new benchmark 10-year issue was January 13th, when the government also sold 5 billion and priced at the more expensive end of guidance of 53 to 56 basis points over mid-swaps.

Spain's 10-year spread with the equivalent German bund rose by more than 10 basis points following yesterday's news on the syndication as investors made room in their portfolios for the new issue.

The Treasury said on June 18th that it would launch a syndicated bond some time in the third quarter.

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