Doors closed to peripheral euro zone debt, whether sovereign or corporate, and investors’ pockets sealed with flat, hard suspicions of unavoidable defaults: the picture that has widely circulated about the markets regarding southern euro countries is well known. But market participants from both sides have moved on. To some degree, at least.
On August 21, Banco Santander issued €2 billion of senior bonds with a 2-year maturity. The debt sale marked the re-opening of the primary market for Spanish issuers for the first time since the first quarter of this year.
Other companies have followed Santander once the window was left ajar. Banks like BBVA, Banesto or Banc Sabadell, and large companies like Telefónica, Iberdrola and Gas Natural have issued paper or are about to do so.
The financial City of Madrid has paid special attention to how the markets behave towards these brave corporates. The conclusions are hopeful. Non residents and investment funds are significantly increasing their demand.
Between 75 percent and 95 percent of most new issues have ended up in non-resident investors’ hands, and investment funds have purchased up to 50 percent of the bond offerings in some occasions. Data from Afi analysts seems to support, then, those who view the European Central Bank intervention as a success. The firewall against further loss of confidence over the future of the euro might be already working.
How the non-resident sector reacts in the following months will tell Spain, and the rest of the euro zone, if they are using the extra time given by ECB in a convenient manner.