Spain sells 10-year bonds through banks

17th January 2011, Comments 0 comments

Spain, struggling to stabilise its public finances, sold 10-year bonds through a syndicate of banks Monday to raise up to five billion euros, attracting strong demand, government and banking officials said.

Eurozone member Spain scrapped plans for a formal bond auction Thursday and decided instead to ask a syndicate of banks to organize the sale with investors, a finance ministry spokesman said.

The goal was to raise four-five billion euros ($5.3-6.6 billion).

The banks got offers worth 10.5 billion euros, said an official at one of the banks involved, France's Societe Generale.

But the yield or rate of return earned by investors jumped to 5.6-5.7 percent, the official said, significantly up from Friday's market close 5.332 percent.

Final results have yet to be announced.

Spain traditionally offers a syndicated bond sale in January. In a syndicated issue, a group of banks agrees to buy, or underwritesm the bond issue and then sells them on to investors, making a profit in doing so.

The banks involved were Santander, BBVA, BNP Paribas, Societe Generale, Citi and Barclays, the finance ministry said.

Spain passed a pivotal test in its first direct bond auction of 2011 on January 13, selling its maximum target of 3.0 billion euros ($3.9 billion) in five-year bonds with demand outstripping supply by two-to-one.

Spain's central and regional governments and its banks combined need to raise about 290 billion euros in gross debt including rollovers in 2011, according to Moody's Investors Service.

It has to roll over 21.79 billion euros of sovereign bonds and bills in April, 20.2 billion euros in July and 23.40 billion euros in October.

The government has faced growing problems in raising fresh funds, with the markets concerned over Spain's high annual deficits and sluggish economy, encumbered by an unemployment rate of nearly 20 percent.

Prime Minister Jose Luis Rodriguez Zapatero vowed last week to meet his goals of cutting Spain's deficit from 11.1 percent of economic output in 2009 to 9.3 percent in 2010 and 6.0 percent in 2011.

The EU deficit limit is 3.0 percent.

© 2011 AFP

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