Spain receives record 130 billion euros of bids for bond sale

Investors placed record orders for Spanish bonds on Wednesday (Jan 10), continuing a run of blockbuster debt sales in the European market at the start of 2024.

An offering of 10-year bonds via banks received more than 130 billion euros (S$189.3 billion) of bids, according to a person familiar with the matter. This smashes the previous all-time high set nearly four years ago during the height of the pandemic when investors were scrambling for haven assets. 

The order frenzy fits the trend this week: a Belgian bond, a dual-tranche offering of notes from Italy and two UK debt sales all saw historic demand this week. That may ease worries that a flood of government debt supply to fund 2024 deficits could derail a recent bond rally, though there are signs some sellers are offering sweeteners to lure buyers.

“Most of the deals have been very well received, but issuers are giving a bit of new issue concession so this is helping,” said Jens Peter Sorensen, chief analyst at Danske Bank, who estimates Spain is offering a new issue premium of about 5 basis points.

The bumper demand helped Spain slightly tighten the pricing to 9 basis points over benchmark debt, from initial guidance of 11 basis points. Bookrunners on the deal are Barclays, BBVA, Crédit Agricole CIB, Deutsche Bank, JPMorgan and Banco Santander.

Sales of bonds in the European primary market from governments, agencies and companies look set to reach record levels this week, with expectations for central banks to ease monetary policy this year. Money markets are betting on more than five quarter-point interest-rate cuts by the European Central Bank, starting in April.

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Spain’s sale “confirms that investors are keen to lock in some duration exposure now that they are convinced the start of the normalisation cycle is near,” said Theophile Legrand, a rates strategist at Natixis. BLOOMBERG