Spain Cancels Bond Auction; Will Switch to Syndication
January 18th, 2011See, What’s a Syndicated Bond?:
So Greece has started issuing occasional syndicated bonds, where it does just what companies do when they want to issue debt: it gets a small syndicate of banks together, and the banks underwrite the bond, promising to buy it if there aren’t enough bids in the market. Then they go out and build a book and sell the bond to investors just like they would with a corporate issue. This way of doing things guarantees that the government will be able to sell all the bonds it wants to sell.
Via: Irish Times:
Spain’s Treasury, facing a volatile market as it looks for ways to keep its debt costs under control, cancelled a bond auction planned for Thursday and said it would issue a syndicated bond over 10 years.
Belgium is also seeking an opportunity to place debt with a syndicate of banks and Portugal also plans one for the first quarter, as fiscally stretched sovereign issuers elsewhere in Europe also seek to cut spiralling financing costs.
Risks premiums on Spanish and Portuguese debt widened and one analyst said Spain’s announcement could add a new layer of uncertainty to an already tense debt market.
“Some weeks ago this possibility was being speculated about. But, far from calming markets it could be interpreted as an attempt by the Treasury to avoid more uncertainty and assure financing at a fixed rate,” said an economist at IG Markets, Soledad Pellon.
The Treasury said the new bond would be a similar volume as last year’s syndicated issue, between €4 billion and €5 billion.
