By Julia Pastor, in Madrid | The hangover following the second LTRO round has brought no headaches, so far. Analysts at the Spanish bank Sabadell have described as ‘very positive’ the €530 billion demanded to the ECB last Wednesday, as well as the increase of the participating European financial entities to 800.
“It can be said that attending these auctions is not a stigma anymore,” say the experts. Furthermore, they affirm that “the global amount will be used to refinance maturities, lower the average liabilities costs, and also to finance the carry trade, via sovereing debt as well as via other instruments.”
At the time the ECB’s injections were being executed, the secondary market witnessed a surprising fact regarding Spanish and Italian sovereign bonds. While the 10-year Spanish bond’s yield decreased under 5%, the 2-year Italian’s contracted to 2%, even lower that the Spanish that is standing at 2,2%.
It is very interesting to point out that the Spanish and the Italian banks were the most benefited from ECB’s LTRO2 since they have also been the most affected by the wholesale liabilities rise. According to market participants, entity orders were distributed in the following amounts:
BBVA’s demand would be around €11 billion (a similar quantity than in LTRO1); Intesa’s, almost €24 billion, and Unicredit reached €12.5 billion( in both cases, the same amount as in the previous order).
On the other hand, the more than a half trillion ECB’s injection has encouraged today’s Spanish Treasury auction, which has sold €1.9 billion in 3-year bonds at 2.748% (against previous 2,989%), another €1.6 billion at 2.213% (compared to previous 3.633%), and €1,5 billion in 5-year debt at a marginal interest of 3.478%, lower than the 3.557% of the previous issue. The overall debt issuance sold was €4,5 billion, according to the Bank of Spain’s data.