Spanish Bonds Benefit from Fed’s Steroids

Ben Bernanke’s dovish message had a direct impact on Spanish debt. The Spanish Treasury held a new auction of bonds and obligations on Thursday, with a 3.08 billion euros issuance in 3-15 years government bonds (above the maximum target of 3,000 bn euros).

The 3-year bond settled with marginal profitability of 2,244%, and a coverage of 2, 23 x ratio. Obligations to 15 years, the marginal profitability was set at 4,829% and the coverage ratio was 2, 73 x.

So far in September, Treasury has issued an amount of 16 billion euros and after this auction, it has covered 78.4% of long-term gross issuance scheduled for the year.

“The Fed decision has been very good for higher-risk assets such as Spanish debt,” said Daniel Pingarron, strategist with IG Markets brokerage in Madrid, to Reuters

The most significant aspect of the recent auctions is the Treasury’s average financing cost, which, since may, is around 3.5% (bonds and obligations), below debt’s average cost in that term (4.16% according to the Treasury).

The Spanish government expects that the reduction of financing costs will result in interest savings for the State, and in this way it will have some margin to offset possible negative deviations elsewhere or to better fulfill its deficit target (6.5% for 2013).

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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