Spain's Biggest Bond Sale in Four Years Draws Record Orders

(Bloomberg) -- Spain drew record orders for its biggest syndicated offering since 2014, with bids reaching more than four times the amount offered.

Orders for the 10-year notes totaled more than 43 billion euros ($52.7 billion), compared with the 10 billion euros on offer, reflecting investor confidence in the once-beleaguered economy and strong demand this year for sovereign debt in the single currency.

The notes will price at 46 basis points above mid-swaps from an initial target of about 50 basis points, according to a person familiar with the matter, who isn’t authorized to discuss the matter and asked not to be identified. Investor orders peaked at 45 billion euros, Spanish Economy Minister Luis De Guindos said at a press conference in Brussels.

Investors have flocked to Spanish debt this year -- cutting the yield premium for 10-year notes to a post-euro crisis low versus similar German bunds -- because of buoyant growth, a Fitch Ratings upgrade last week and easing tensions in Catalonia. The order flurry also mirrors similar demand for recent sales by countries including Italy, Macedonia and Portugal.

“The timing of the sale is excellent,” said Kim Liu, an ABN Amro Group NV strategist. The Fitch upgrade “has been an additional push in the right direction for the Spanish bonds,” he said.

The debt sale is the nation’s largest syndicated offering since 2014, when it raised 10 billion euros of notes maturing in 2024. A year ago it sold 10-year bonds at 77 basis points above mid-swaps.

Fitch upgraded Spain by one notch to A-, the seventh-lowest investment grade, on Jan. 19. The nation is rated a step lower by S&P Global Ratings at BBB+, with a positive outlook. A review is due in March. Moody’s Investors Service has a Baa2 mark, the ninth-lowest investment grade, with an update set for April.

In the secondary market, Spanish bonds are on course for a fourth day of gains. That has helped cut the yield premium for existing 10-year notes versus German bunds by 32 basis points this year 82 basis points, according to data compiled by Bloomberg. The nation drew almost 40 billion euros of orders for a 10-year bond sale in 2014.

Barclays Plc., Banco Bilbao Vizcaya Argentaria SA, Citigroup Inc., HSBC Holdings Plc., NatWest Markets Plc. and Banco Santander SA are working on the Spanish bond sale, the person said.

--With assistance from Paul Cohen and Lyubov Pronina

To contact the reporters on this story: John Ainger in London at jainger@bloomberg.net, Joao Lima in Lisbon at jlima1@bloomberg.net.

To contact the editors responsible for this story: Hannah Benjamin at hbenjamin1@bloomberg.net, Ven Ram at vram1@bloomberg.net, Neil Denslow

©2018 Bloomberg L.P.