Banco Santander SA (SAN) raised 2 billion euros ($2.5 billion) from the first sale of senior unsecured bonds by a Spanish bank in more than five months.
Spain’s biggest lender tapped debt investors as the nation’s government prepares to hash out terms for the 100 billion-euro bailout of its financial system. Spanish banks posted record losses of 10.7 billion euros in the first half as provisions for bad loans surged, the Bank of Spain said Aug. 17.
“Santander’s bond deal sets a standard for other Spanish banks considering returning to the market,” saidSerafi Rodriguez, a fixed-income trader at Morabanc in Andorra. “Santander is the biggest and the most defensive name in the Spanish financial sector.”
The two-year 4.375 percent notes for Santander, which doesn’t need rescue funds, were priced to yield 3.9 percentage points, or 390 basis points, more than the benchmark swap rate, according to Bloomberg data. That compares with a spread of 250 basis points on five-year bonds the bank sold in March in the last offering of unsecured notes by a Spanish lender, Societe Generale SA data show.
The extra yield investors demand to buy bonds from financial institutions in the euro-area’s peripheral countries has dropped to 463 basis points relative to the swap rate, according to Bank of America Merrill Lynch’s Euro Periphery Financial Index. The gap has narrowed from 548 basis points on July 25, the day before ECB President Mario Draghi pledged to do “whatever it takes to preserve the euro.”
“More issuers may tap the market following the recent spread tightening,” said Maureen Schuller, an Amsterdam-based credit analyst at ING Groep NV. (INGA) “Spanish spreads have re- tightened significantly since the end of July.”
The Santander, Spain-based lender sold the debt as the European Central Bank considers steps to bring borrowing costs in the euro region’s peripheral countries closer to record-low official interest rates. Spain sold 12-month bills today at yield of 3.07 percent, down from 3.918 percent at its last sale of the debt in July.
Santander managed the sale of its bonds with Credit Agricole SA (ACA), Deutsche Bank AG and Natixis. Santander is rated Baa2 by Moody’s Investors Service, the second-lowest investment grade.
To contact the reporter on this story: Esteban Duarte in Madrid at firstname.lastname@example.org
To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net