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13 May 2014

WSJ: Spain checks debt-market milestones


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The government raised €5 billion with a 10-year bond, whose returns reflect the European harmonised consumer-price index. Meanwhile, Bankia is seeking to raise at least €500 million from selling 10-year junior bonds to help beef up its capital buffers ahead of Europe's banking "stress tests".


The sovereign-bond launch, originally planned a couple a years ago but scuttled by the eurozone crisis, was well received by investors, who placed €20 billion in orders. The yield is in the area of 1.85 per cent. The deal gives investors an entry into a new Spanish asset class, while the Treasury will be able to diversify its funding base.

The issuance allows Spain to join a small group of eurozone members - Germany, France and Italy - that sell inflation-linked bonds on a regular basis. Smaller eurozone countries with lower funding needs are unlikely to follow suit, as the issuance of so-called linkers doesn't normally exceed 10 per cent of a country's annual government bond issuance.

Bankia's 10-year bond is likely to offer a yield of roughly 4 per cent, according to bankers working on the sale. Euro-denominated subordinated bonds issued by financial companies yield 2.82 per cent on average, according to a Markit index, showing that investors demand a significant premium for Bankia's debt.

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© Wall Street Journal


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