The announcement on Tuesday of a syndicated offering of a 15-year bond by Spain sent markets off with unease, driving yields up and putting pressure on other peripheral markets such as Portugal, which plans a bond auction of its own on Wednesday.
According to Reuters, the announcement of the syndication deal sent yield spreads widening, with Spain 216 basis points out from the German Bund. According to an unnamed trader quoted in the account, "With the news of the syndication we're seeing Spain go wider and there's a general soft feeling in the market toward the periphery."
That was borne out in the pressure on Italian and Greek debt, which also saw their yield spreads widen, and on Portuguese bonds, which courted record territory in advance of a planned Wednesday auction.
Monday had already been a tough day for the peripheral euro zone debt market after Greece’s credit rating was slashed by three slots by Moody’s and Portuguese yields saw euro-era highs. Tuesday continued the theme as Thomson Reuters service IFR said in the report that the syndicated Spanish bond would be some 15-20 basis points higher than the 4.65T% July 2025 bond.
Michael Leister, strategist at WestLB in Düsseldorf, was quoted as saying of the offering, "This gives you an idea that the concession has to be quite heavy to give investors an incentive to buy the bond so the primary market is putting pressure on the secondary market. Also, the market was already preparing for Portugal's sale tomorrow … where we expect to also see quite a decent concession."
The Spanish syndicated bond issue was expected to be between 3-5 billion euros ($4.171-$6.952 billion).
Greece was also planning an auction of 26-week T-bills, which, despite the Moody’s downgrade, was expected to proceed smoothly in the manner of recent transactions by Athens.