Spain Issues More Bonds Than Targetted At Deteriorating Internals; Market Responds Favorably



We start off the morning with a key bond auction out of Spain that came rather mixed as only one out of three issues priced better than the previous auction, and two out of three had lower bids to cover; yet somehow it was considered a smashing success because a total of €6.03 billion was sold more than the €3.5 billion targeted. First the details: Spain sold €2.45 Bn of 3.15% Jan'16s, at a worse bid/cover of 2.00 vs. Prev. 2.83, and a better yield of 4.023% vs. 5.276% previously; €2.18 Bn, 4.00% Apr'20, at a worse bid/cover 1.50 vs. Prev. 2.01 a worse yield of 5.239% vs. Prev. 5.006%, and lastly €1.4 Bn, 5.50% Apr'21, at a better bid/cover 2.20 vs. Prev. 1.76, and a worse yield 5.545% that was again higher than the previous 5.433%. However, in this world of living bond auction to bond auction, this is considered a smashing success and the result is 5 point rush higher in S&P. And here is the official party line courtesy of Reuters: "Spanish bond yields fell on Thursday, narrowing the spread over German Bunds after the country surprised markets by selling far more than the amount targeted in its last bond sale of the year, although its cost of borrowing remained close to euro-era highs.Bunds were steady but are firmly supported ahead of year-end by investors seeking safer liquid assets as markets question euro zone leaders' ability to find a lasting solution to the debt crisis now in its third year. Spain sold just over 6 billion euros of five- and 10-year paper, compared with a targeted maximum of 3.5 billion euros, taking issuance this year up to its target of 94 billion euros, according to Reuters data. It paid a yield on the 10-year paper maturing in 2021 of 5.545 percent. Spanish 10-year government bonds trading in the secondary market were 17 basis points lower on the day at 5.57 percent, leaving the spread over Bunds at 363 basis points." And just like High Yield issuers, the fate of Europe now relies on market windows: which means that while bond auctions such as today will "succeed", a bond auction scheduled on a day when the market crashes will fail with almost certainty. And while HY issuers can easily pull a bond issue due to "market conditions", countries do not have that luxury, and what happens next nobody knows.

Wall Street's response to auction:

JOSE LUIS MARTINEZ, STRATEGIST, CITIGROUP, MADRID

"(The Treasury) has surpassed its target again on strong demand. The result is surprisingly positive considering these times of market volatility."

ANNALISA PIAZZA, MARKET ECONOMIST, NEWEDGE, LONDON

"Total amount on offer is higher than the initial target range of 2.5-3.5 billion euros. This is good news as all lines were well covered at today's auction. Attractive valuations seem to have been supportive today as all lines cheapened considerably ahead of today's tap.

"The recent re-widening of EMU periphery's spreads might also explain today's success of the Spanish auction as this is the last periphery's auction until year-end when Italy holds its BTP tap."

PETER CHATWELL, RATE STRATEGIST, CREDIT AGRICOLE CIB

"Surprisingly good auctions, selling 6 billion euros in an auction of up to 3.5 billion. And the statistics look strong too -- tails are OK so this is not a case of accepting significantly cheaper orders to issue in large size. The orders look like they were good quality. There had been a lot of demand for short-end Spanish paper in recent sessions and this now seems to have moved into the longer maturities, judging by these auctions."

MICHAEL LEISTER, RATE STRATEGIST, WESTLB, DUESSELDORF

"A good auction ... they managed to sell quite a chunk. In terms of pricing they came in substantially below secondary market levels."

"It won't help to calm these fears everyone in the market is having about funding in 2012, but Spain is considered a far more attractive credit than Italy."

"I guess they (the Spanish Treasury) were a bit surprised themselves and they behaved opportunistically and took as much as they could. They can do some prefunding as the conditions look fairly alright for them."

MARC OSTWALD, STRATEGIST MONUMENT SECURITIES

"(They sold) way more than they wanted to. Very clever, because as we all know ... they have got a whole lot of refinancing to do next year so they may as well get on with it. I think the cover is very good particularly in light of the fact that they have sold almost double what they wanted to sell.

"These are still high levels of rates but they are a lot better than Italy's ones.

"It's a small victory because in the greater scheme of things managing to do 2.5 billion more than they needed to is good but there is still tens of billions to do next year, so we will see how the next ones looks.

MARKET REACTION:

- Bund future was up three ticks at 137.89 compared to 137.83 before the auction results.

- The Spanish/German 10-year government bond yield spread narrowed to 364 bps compared to 382 bps before the auction.

Table: See for full auction details.

BACKGROUND:

- Spain was expected to pay lower yields than Italy for its medium-term bonds..

- The sale comes after Spain saw strong demand at a sale of 12- and 18-month Treasury bills earlier this week. .

- Italy on Wednesday sold 3 billion euros of five-year benchmark bonds but its funding costs reached a euro-era record at the auction after a EU summit last week failed to draw a line under the euro zone debt crisis.

- German and Swedish debt sales also on Wednesday showed investors were prepared to accept ultra-low interest rates to park their money in comparatively safe assets.

Spain Issues More Bonds Than Targetted At Deteriorating Internals; Market Responds Favorably



We start off the morning with a key bond auction out of Spain that came rather mixed as only one out of three issues priced better than the previous auction, and two out of three had lower bids to cover; yet somehow it was considered a smashing success because a total of €6.03 billion was sold more than the €3.5 billion targeted. First the details: Spain sold €2.45 Bn of 3.15% Jan'16s, at a worse bid/cover of 2.00 vs. Prev. 2.83, and a better yield of 4.023% vs. 5.276% previously; €2.18 Bn, 4.00% Apr'20, at a worse bid/cover 1.50 vs. Prev. 2.01 a worse yield of 5.239% vs. Prev. 5.006%, and lastly €1.4 Bn, 5.50% Apr'21, at a better bid/cover 2.20 vs. Prev. 1.76, and a worse yield 5.545% that was again higher than the previous 5.433%. However, in this world of living bond auction to bond auction, this is considered a smashing success and the result is 5 point rush higher in S&P. And here is the official party line courtesy of Reuters: "Spanish bond yields fell on Thursday, narrowing the spread over German Bunds after the country surprised markets by selling far more than the amount targeted in its last bond sale of the year, although its cost of borrowing remained close to euro-era highs.Bunds were steady but are firmly supported ahead of year-end by investors seeking safer liquid assets as markets question euro zone leaders' ability to find a lasting solution to the debt crisis now in its third year. Spain sold just over 6 billion euros of five- and 10-year paper, compared with a targeted maximum of 3.5 billion euros, taking issuance this year up to its target of 94 billion euros, according to Reuters data. It paid a yield on the 10-year paper maturing in 2021 of 5.545 percent. Spanish 10-year government bonds trading in the secondary market were 17 basis points lower on the day at 5.57 percent, leaving the spread over Bunds at 363 basis points." And just like High Yield issuers, the fate of Europe now relies on market windows: which means that while bond auctions such as today will "succeed", a bond auction scheduled on a day when the market crashes will fail with almost certainty. And while HY issuers can easily pull a bond issue due to "market conditions", countries do not have that luxury, and what happens next nobody knows.

Wall Street's response to auction:

JOSE LUIS MARTINEZ, STRATEGIST, CITIGROUP, MADRID

"(The Treasury) has surpassed its target again on strong demand. The result is surprisingly positive considering these times of market volatility."

ANNALISA PIAZZA, MARKET ECONOMIST, NEWEDGE, LONDON

"Total amount on offer is higher than the initial target range of 2.5-3.5 billion euros. This is good news as all lines were well covered at today's auction. Attractive valuations seem to have been supportive today as all lines cheapened considerably ahead of today's tap.

"The recent re-widening of EMU periphery's spreads might also explain today's success of the Spanish auction as this is the last periphery's auction until year-end when Italy holds its BTP tap."

PETER CHATWELL, RATE STRATEGIST, CREDIT AGRICOLE CIB

"Surprisingly good auctions, selling 6 billion euros in an auction of up to 3.5 billion. And the statistics look strong too -- tails are OK so this is not a case of accepting significantly cheaper orders to issue in large size. The orders look like they were good quality. There had been a lot of demand for short-end Spanish paper in recent sessions and this now seems to have moved into the longer maturities, judging by these auctions."

MICHAEL LEISTER, RATE STRATEGIST, WESTLB, DUESSELDORF

"A good auction ... they managed to sell quite a chunk. In terms of pricing they came in substantially below secondary market levels."

"It won't help to calm these fears everyone in the market is having about funding in 2012, but Spain is considered a far more attractive credit than Italy."

"I guess they (the Spanish Treasury) were a bit surprised themselves and they behaved opportunistically and took as much as they could. They can do some prefunding as the conditions look fairly alright for them."

MARC OSTWALD, STRATEGIST MONUMENT SECURITIES

"(They sold) way more than they wanted to. Very clever, because as we all know ... they have got a whole lot of refinancing to do next year so they may as well get on with it. I think the cover is very good particularly in light of the fact that they have sold almost double what they wanted to sell.

"These are still high levels of rates but they are a lot better than Italy's ones.

"It's a small victory because in the greater scheme of things managing to do 2.5 billion more than they needed to is good but there is still tens of billions to do next year, so we will see how the next ones looks.

MARKET REACTION:

- Bund future was up three ticks at 137.89 compared to 137.83 before the auction results.

- The Spanish/German 10-year government bond yield spread narrowed to 364 bps compared to 382 bps before the auction.

Table: See for full auction details.

BACKGROUND:

- Spain was expected to pay lower yields than Italy for its medium-term bonds..

- The sale comes after Spain saw strong demand at a sale of 12- and 18-month Treasury bills earlier this week. .

- Italy on Wednesday sold 3 billion euros of five-year benchmark bonds but its funding costs reached a euro-era record at the auction after a EU summit last week failed to draw a line under the euro zone debt crisis.

- German and Swedish debt sales also on Wednesday showed investors were prepared to accept ultra-low interest rates to park their money in comparatively safe assets.

Iniciado por socrates99

QUE COÑO LOS MERCADOS!!!!
Quién compra esto???Quién ha dejado barra libre a los bancos hasta dentro de dos años al 0,5%????A cuanto le pagan la deuda los bancos los estados tipo España???
Las cartas estan marcadas,es el mayor expolio de la historia de la humanidad...

Iniciado por socrates99

QUE COÑO LOS MERCADOS!!!!
Quién compra esto???Quién ha dejado barra libre a los bancos hasta dentro de dos años al 0,5%????A cuanto le pagan la deuda los bancos los estados tipo España???
Las cartas estan marcadas,es el mayor expolio de la historia de la humanidad...