The return of the Spanish mortgage-backed bond


This is no mean feat for a Spanish bank. Since 2007, BBVA has now been the first Spanish entity to launch in the primary market a sale of 10-year covered bonds. Thursday’s €1-billion issuance was successful: demand from 165 institutional investors was 3-times higher, and 85 percent came from foreign agents.

German investors were 35 percent of the external demand, followed by investors from the UK (14 percent) and France (14 percent).

BBolsa analysts said this could be “a first step towards the stabilisation of the real estate asset-backed debt market in Spain, and housing market. On the other hand, the conditions of this transaction implies solid investor confidence on BBVA, even though the volume was small.”

The operation recorded a risk premium of 215 basis points and an interest rate of 3.875 percent. The last debt auctions by the Spanish government left interest rates at 5.1 percent after the risk premium move upwards 7 basis points to 349, far from the over 600 in the first quarter of 2012.

According to Standard & Poor’s, housing prices in Spain are set to contract by 20 percent by 2017. “The euro crisis is still pulling down home prices in most countries. The adjustment since 2008 in Spain would be at least -26 percent and a further drop of 20 percent would cut estimates by half comparing to the period previous to the crisis,” S&P added.

Spain’s financial industry stated protection against such change in real-asset value is already  in place. In fact, on January 21, the European Stability Mechanism fund will transfer €1.865 billion as part of the assistance to the Spanish banking sector restructuring. Banco Mare Nostrum will take €730 million to help its recapitalisation, €604 million for Banco Ceiss, €124 million for Liberbank and €407 for Caja 3, all entities resultant from failed savings banks.

About the Author

Victor Jimenez
London contributor at, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.

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