Before someone else sets sight on this graph and rolls out the Armageddon tale about the fall of the euro empire because of Spain’s disgrace, we would like to make available this explanation, which came via Madrid-based Link Securities. Is this chart indicative of a trend change in terms of buyer appetite of investors?
“We think not. The abundance of liquidity in the system and its channelling by the banks (mainly residents) into assets with a profitable spread, should serve to maintain the strength of demand in future Spanish bond sales.
Link analysts hint at the high probability that the decision not to place 100% of the offer in debt auctions is the result of a policy of containment of the financial cost, and not due to any difficulties regarding demand. The rise in bond yields in March (more than 20pb) could be the main proof that the Spanish Treasury prefers to sell below the maximum target.
“This, coupled with the good rate of sovereign issuance so far in 2012 (nearly €54 billion, equivalent to 37% of the debt maturing this year and 30% of the gross target placement), reduces the need to find funds at any price.”
[Rate of completed bond sale volume against the maximum target announced in each debt auction]