Spain sold around 4 billion euros worth of bonds at one of the auctions on Thursday, which pretty much kick-started the country’s funding program meant for a tough 2013, during which, Madrid must reform the needs of regional debt while it struggles to meet the targets of deficit. The Treasury pinned down the top most of target of around 2.5 to 3.5 billion euros at slightly down borrowing costs compared to previous outings from the same document but it is still too high to feel comfortable.
Average yield on 2012 bond as recorded was 5.517%, compared to around 5.6% for benchmark 10 year on secondary market, far away from more than 7% levels in the month of July. Nick Stamenkovic, one of the bond strategists from RIA Capital Markets said that it was clearly reflecting that Spanish sentiment had marginally improved.
He explained that Spain has already been funded for the year 2012 and market is sure that early in 2013 the country will ask for bailout funds when they are forced to encounter issuance wall. Madrid currently is facing around 28 billion euros of debt related redemptions in the month of January and in the year 2013 its funding needs will increase from 186 billion euros in this year to 207 billion euros.
This amount could still go higher if the country overshoots the 6.3% of deficit target in the current year and 4.5% in next year, which was warned as a possibility by the Bank of Spain on last Wednesday. Spain sold bonds worth 3.6 billion euros that were maturing Oct 31st, 2015, bonds worth 645 million euros that were maturing on July 30th, 2017, and bonds worth 1.5 billion euros that were maturing April 30th, 2021.
Concerned about welfare system slipping into the deficit in this year, from a pretty balanced target of budget, the ministry of economy said that the reserve fund of social security will get 3.3 billion euros worth of 5-year sovereign bond.
Madrid is expected to aid the regional governments that are struggling, cut out of the debt markets that could further add to its bill a sum of 40 billion euros. The country’s economy is said to be recession hit since one year, the second one since 2009, and isn’t expected to grow up until late 2013. Around 25% of workers in Spain are without job and tax relief, and spending cuts have resulted in many violent protests throughout the country.