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Spain Sells First-Ever 50 Year Bonds At 4% Coupon

Tyler Durden's picture




 

Perhaps in order to celebrate its manufacturing PMI dropping from 53.9 to a below expectations 52.8, refuting the "growth story" promoted by its definitionally re-revised GDP (where the long overdue boost from hookers and blow is finally leading the country to new and improved Keynesian growth curves), moments ago Spain joined the likes of Canada, Caterpillar and Goldman and just issued, for the first time in its history, 50 Year bonds in a private placement. From Bloomberg:

  • SPAIN SELLS EU1B 50-YR BONDS
  • SPAIN TREASURY SELLS FIRST-EVER 50-YR BONDS, COUPON 4%

And since there is no hope that Spain will ever repay this bond, whose rate is dictated by anything - mostly the ECB's monetary policy - but the fundamentals it is functionally equivalent to Spain raising new equity without a maturity date and a 4% dividend.

The only question is whether the buyers of this syndication are the Elliotts of the world, who are happy to wait the 1-3 years until this too bond joins Argentina in the "trading flat" category, before they exercise their legal powers as yet another debt-for-equity conversion transfers billions in public assets into private hands.

 

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Mon, 09/01/2014 - 10:39 | 5167361 LawsofPhysics
LawsofPhysics's picture

The world is japan!!!  LMFAO!!!

Mon, 09/01/2014 - 10:56 | 5167449 y3maxx
y3maxx's picture

....Here comes "MYRA".

and in Canada, here comes "LOONIERSSP"

Mon, 09/01/2014 - 13:04 | 5167972 DeadFred
DeadFred's picture

Really, what could go wrong?

Mon, 09/01/2014 - 10:38 | 5167363 Haus-Targaryen
Haus-Targaryen's picture

Who would actually buy this crap!? 

Mon, 09/01/2014 - 10:49 | 5167366 LawsofPhysics
LawsofPhysics's picture

pension funds, institutional investors and other dumb money.  The government and the the oligarchs still decide what is "good" collateral and what is "bad" collateral, that's how they maintain power and control.  They will mandate that physical assets, such as PMs, are bad and all government paper is good.  Remember in order to keep printing and handing that free money out to your friends, you still need the appearance of some collateral...

 

We have been here before, the outcome will be no different this time around.

Mon, 09/01/2014 - 11:10 | 5167517 KnuckleDragger-X
KnuckleDragger-X's picture

The only question is how long till they become the EU's Argentina?

Mon, 09/01/2014 - 11:36 | 5167627 Pool Shark
Pool Shark's picture

 

 

What makes you think any of the purchasers will be holding them for 50 years?

They're a commodity to be bought and sold (at a profit)...

 

 

Mon, 09/01/2014 - 11:39 | 5167644 LawsofPhysics
LawsofPhysics's picture

yes, further accelerating the demise of the underlying currency.  Exponential equations are a bitch like that.

Mon, 09/01/2014 - 12:33 | 5167837 Jack Sheet
Jack Sheet's picture

So what's new?
British Gilt Consols NEVER mature.

Last Price Update : 1 Sep 2014
Price : 65.747
Coupon : 2.5%
Yield : 3.802
Running Yield : 3.80
Maturity :
Call :
ISIN : GB0002163805

https://www.fixedincomeinvestor.co.uk/x/bondchart.html?id=180&stash=F670...

Mon, 09/01/2014 - 12:48 | 5167896 DetectiveStern
DetectiveStern's picture

Well if it worked in 1751...

I just read about these. They are classed as Teir One capital and are not callable for 5 years. How can this be classed as Capital when you are just giving your Capital to someone who may or may not pay it back after 5 years minimum.

Mon, 09/01/2014 - 10:44 | 5167384 Sudden Debt
Sudden Debt's picture

Your pension fund and banks who will use it as collateral to support their own debt X100

Mon, 09/01/2014 - 11:05 | 5167485 Ghordius
Ghordius's picture

to the excellent answers above... managers of Other People's Money who are actually scared of the Return of Investment day. Having said that, that 4% coupon is juicy. I admit I will follow the prices

Mon, 09/01/2014 - 11:35 | 5167619 jarana
jarana's picture

50 years is quite a half of a "world-wide economic paradigm" age

No one thinks it will be paid.

It only buys time. It's like restructuring some of the EU debt to perpetuity without saying the word "default".

Expect the same or similar for other EU countries (even Germany).

EU is trying to avoid QE, so they must "restructure" the debt without saying "default".

Mon, 09/01/2014 - 12:22 | 5167795 pragmatic hobo
pragmatic hobo's picture

... people playing with other people's money ...

Mon, 09/01/2014 - 15:37 | 5168551 garypaul
garypaul's picture

Not even. This 'money' is just made up on the fly.

 

Mon, 09/01/2014 - 12:43 | 5167891 DetectiveStern
DetectiveStern's picture

Peak Bond Issue.

Mon, 09/01/2014 - 10:45 | 5167371 JustObserving
JustObserving's picture

Not one in a billion chance that Spain will not default in 50 years. Or not pay back in hyperinflated, worthless currency.

This is beyond reason. How low has your IQ to be to be an economist today?

Mon, 09/01/2014 - 10:50 | 5167418 LawsofPhysics
LawsofPhysics's picture

Well, considering that eCONomics is in fact a social science, your IQ can be pretty low.

Mon, 09/01/2014 - 10:55 | 5167443 JustObserving
JustObserving's picture

Apparently, low enough that you cannot read the unemployment rate in Spain.

Mon, 09/01/2014 - 11:01 | 5167472 LawsofPhysics
LawsofPhysics's picture

Let me be clear; there is not, nor has there ever been a political, monetary, or economic solution to resource scarcity.

Unemployment? who fucking cares so long as they can be controlled.  If they can't be controlled, conscription bitches.  Even if it means they kill each other.

 

same as it ever was...

Mon, 09/01/2014 - 12:40 | 5167875 Jack Sheet
Jack Sheet's picture

"science" - that's rich...

Mon, 09/01/2014 - 10:55 | 5167447 Bangin7GramRocks
Bangin7GramRocks's picture

This entire exercise shows extremely high, villainous IQ's. We were told that Spain and almost all of Europe was completely broke, busted and bankrupt. With only words, "they" have convinced enough people that everything is fixed that "they" can now sell 4% 50 year bonds. It's all bullshit, but it's fucking brilliant bullshit.

Mon, 09/01/2014 - 11:08 | 5167503 Ghordius
Ghordius's picture

who told you that? Bank of America? American fund managers that could not find Spain on a map? Spain entered this mess and was judged dead by many while having a debt-to-GDP level below 60%, for example

Mon, 09/01/2014 - 11:20 | 5167561 LawsofPhysics
LawsofPhysics's picture

Yes, right up until the suppliers of real shit, especially energy and other essential commodities decide that they are not getting a good deal.  Going forward, the energy exporters will have all the power to negotiate because exponential equations are a real bitch. 

 

Barring a significant decrease in the human population, there will plenty of demand for energy and other resources.

 

Mon, 09/01/2014 - 11:27 | 5167591 CheapBastard
CheapBastard's picture

The deflationary recession we are in with very cheap oil, gas, etc will only last so long. As you say, demand will kick in at some point and when you add that to the global debasement of currencies we're going to see soaring commodity prices imho.

 

As more nations face off vs merika, they will suck up war commodities especially.

Mon, 09/01/2014 - 11:38 | 5167638 LawsofPhysics
LawsofPhysics's picture

Yes, but considering that oil was less than $50 per barrel ten years ago, I'd hardly consider it "cheap" right now.  Lilke PMs, the price has "stabilized", for now...

Mon, 09/01/2014 - 10:43 | 5167388 More_sellers_th...
More_sellers_than_buyers's picture

Why not? Nothing will be worth shit in 10 years ... May as well enjoy the coupon

Mon, 09/01/2014 - 11:50 | 5167677 chubbar
chubbar's picture

Or, instead of realizing a nominal 40% return of your investment after 10 years on the 100% you gave them, you could consider keeping the 100% until you found something worth purchasing that would keep it's purchasing power and/or relative worth after the reset of worthless currencies. Just an idea.

Mon, 09/01/2014 - 13:14 | 5168000 DeadFred
DeadFred's picture

If you have a couple billion in assets you quite literally have to find somewhere to put it. Paper cash is not an option. Goverments can sieze accounts, banks can go bankrupt so where do you park the money? This is a good investment if you're sure you can find a greater fool in time. They can't be sure but many think they can.

Mon, 09/01/2014 - 10:45 | 5167400 Global Hunter
Global Hunter's picture

4%?  Its the buying opportunity of a lifetime they are practically giving these things away! 

Mon, 09/01/2014 - 10:55 | 5167444 Seize Mars
Seize Mars's picture

Ha ha ha ha HA hA

Mon, 09/01/2014 - 10:55 | 5167445 Danno Anderson
Danno Anderson's picture

Eurobonds:

From Wikipedia, the free encyclopedia 
Not to be confused with Eurobond. 
European bonds are suggested government bonds issued in Euros jointly by the 18 eurozone nations. Eurobonds are debt investments whereby an investor loans a certain amount of money, for a certain amount of time, with a certain interest rate, to the eurozone bloc altogether, which then forwards the money to individual governments. 

Eurobonds have been suggested as a way to tackle the European sovereign debt crisis as the indebted states could borrow new funds at better conditions as they are supported by the rating of the non-crisis states. 

Because Eurobonds would allow already highly-indebted states access to cheaper credit thanks to the strength of other Eurozone economies, they are controversial, and may suffer from the free rider problem.[1] 

 

More: 

http://en.wikipedia.org/wiki/Eurobonds

Mon, 09/01/2014 - 11:09 | 5167514 Ghordius
Ghordius's picture

in short: EuroBonds, the wet dream of the City of London bankers. Thanks, but no, thanks

Mon, 09/01/2014 - 10:57 | 5167454 IANAE
IANAE's picture

was it Einstein who said imagination is more important than knowledge?

 

Mon, 09/01/2014 - 10:57 | 5167455 ThroxxOfVron
ThroxxOfVron's picture

4% might look really good 5 or 6 years down the line.

Check the rate on the US 30yr today..

Mon, 09/01/2014 - 11:00 | 5167465 Occam's Norelco
Occam's Norelco's picture

Perhaps some of you might now understand why many Catalans and Basques would like to jump the ever-sinking S.S. Spain. In the case of Catalonia, they are screwed if they actually get independence. On the other hand, they are also screwed if they remain a part of a country that is sinking deeper and deeper. In many Catalans' view, not all Catalans think thiis of course,  it is best to sink by yourself and be not tied to a Titanic going down. Just bear this in mind when the "Diada" is celebrated in about a week's time. In the meantime, the Basques still actually make stuff and are sitting on the fence, looking at what will happen in Catalonia and Scotland. Interesting times.

Mon, 09/01/2014 - 12:51 | 5167920 Jack Sheet
Jack Sheet's picture

The best part of indpendence is deciding what currency to use, without it getting fucked by speculators.
This is the one reason why Scottish independence will not occur.

Mon, 09/01/2014 - 10:59 | 5167466 GrinandBearit
GrinandBearit's picture

Bullish !

Mon, 09/01/2014 - 11:03 | 5167480 Bam_Man
Bam_Man's picture

Once upon a time, when the UK was actually solvent,  they issued bonds called "Perpetual Gilts" in order to make it clear that there would never be any re-payment of principle.

Today, it goes without saying.

Mon, 09/01/2014 - 11:05 | 5167484 Stockmonger
Stockmonger's picture

To be fair, over 50 years, 4% coupon will deliver 2.5x the initial investment, with a breakeven at 18 years.  All Spain is doing is printing money, except by asking bankers to print the money for them in exchange for a 4% dividend over 50 years.  Because bankers like having a claim on tax revenue.

Mon, 09/01/2014 - 11:23 | 5167576 TrustbutVerify
TrustbutVerify's picture

You are missing the inflation that will likely occur.  

Mon, 09/01/2014 - 11:08 | 5167504 Smegley Wanxalot
Smegley Wanxalot's picture

La cucaracha, la cucuracha, come and buy a bond from meeeeee,

La cucaracha, la cucuracha, with your money we parteeee.

La cucaracha, la cucuracha, don't expect to get it back,

La cucaracha, la cucuracha, if you bitch your life we whack.

 

Mon, 09/01/2014 - 11:09 | 5167512 Cthonic
Cthonic's picture

What are going to do, keep doubling the duration every five years?  Next we'll see century bonds, then bicentennial bonds, and finally they'll issue perpetuals.

Mon, 09/01/2014 - 11:18 | 5167552 Ghordius
Ghordius's picture

it would not be the first time. In fact, the first time I know of... the issuing entity was then called Monte dei Paschi di Siena. Which then became the oldest bank of the world

Mon, 09/01/2014 - 12:15 | 5167750 spanish inquisition
spanish inquisition's picture

Perpetual bonds sound so bland. Lets call them Infinity Bonds! Makes them sound like something a superhero would have.

Edit: Technically that's what we have, all that is being done is rolling over principal. 

Mon, 09/01/2014 - 12:35 | 5167858 silverer
silverer's picture

Yep, we're learning their game!  "Infinity Gold", "Infinity Platinum", "Infinity Silver" bonds.  Here we go!!

Mon, 09/01/2014 - 12:33 | 5167846 silverer
silverer's picture

I think they already did issue "perpetuals".  But don't count on them to accurately describe their financial products, because they never did in the first place.

Mon, 09/01/2014 - 11:16 | 5167550 world_debt_slave
world_debt_slave's picture

they should just do what Scientology does, create an org like Sea Org and have the recruits work for nothing forever.

Mon, 09/01/2014 - 12:57 | 5167567 TrustbutVerify
TrustbutVerify's picture

50 years at 4%...It should be assumed the issuers are assuming that inflation over time will be higher than that 4% yield and that dumb money will buy in.  And buyers have to assume inflation will be low, after the world has printed money for so long.  Also, that the country, itself, won't go, or isn't already, bankrupt.    

Sounds like a loser to me.  But this bond or an equal cureency amount of gold.  You decide.  

Mon, 09/01/2014 - 11:21 | 5167569 CheapBastard
CheapBastard's picture

I'm waiting for the 50 year, no money down, no interest car loans with a balloon payment at the end of 50 years.

Mon, 09/01/2014 - 11:32 | 5167603 Smegley Wanxalot
Smegley Wanxalot's picture

Don't forget you'll also get the 4500 Cash For Clunkers tax credit now when you sign up for that 50 year car loan, or 7500 in a tax refund if it's a hybrid, or both if you know the right people.

Mon, 09/01/2014 - 11:29 | 5167602 Miss Expectations
Miss Expectations's picture

In Spain, everything's on the table:

Spanish government started a breeding program to bring back the giant Valenciano Rabbit

http://modernfarmer.com/2014/08/giant-rabbits/

 

 

Mon, 09/01/2014 - 11:36 | 5167628 MrSteve
MrSteve's picture

This is a near-instant replay of the Spanish banks telling its depositors it had these great bank bonds paying way more than the deposit accounts. The bonds then immediately tanked, cheating the lied-to, newly fooled buyers. Just like the South Park parody, It's Gone! only not a cartoon for the gullible who were mostly trusting elders who had used the banks for a very long time.

I would label these 50 year bonds as Preferred, Zerple A-rated wallpaper.

Mon, 09/01/2014 - 11:42 | 5167655 IridiumRebel
IridiumRebel's picture

Give em' all a Spiderman towel....

Mon, 09/01/2014 - 11:41 | 5167648 Wahooo
Wahooo's picture

Payable at maturity by the Government of ISIS.

Mon, 09/01/2014 - 12:12 | 5167744 silverer
silverer's picture

Yes, but...oops! Islam forbids the paying of interest!  Thanks for the principal loan!

Mon, 09/01/2014 - 11:47 | 5167666 Dr Dooom
Dr Dooom's picture

This is a not a bond, it is an equity on Spain, with 4% cupon, for 50 years! How can anyone turn this down? I have heard that equities are better than bonds at these rate levels! And just think of capital gains one will get when this one goes to 0,5% yield, and you still get 4% annually. How can one loose? 

Mon, 09/01/2014 - 12:11 | 5167739 silverer
silverer's picture

It's a safe bet for the politicians, none of whom will be around for another 50 years (and Spain probably won't be, either).

Mon, 09/01/2014 - 12:06 | 5167727 drdolittle
drdolittle's picture

Who would buy this shit? Has the world gone completely mad? I know the answers, CBs and asset managers with OPM and, yes, completely fucking insane.

Mon, 09/01/2014 - 12:10 | 5167737 silverer
silverer's picture

Inspired by the infamous "99 year lease".  Where are the bumper stickers to promote this? "DEBT FOREVER".  Catchy, eh?

Mon, 09/01/2014 - 12:14 | 5167759 The Merovingian
The Merovingian's picture

Obama:  Did somebody say 'fore'?  Where's my putter?

Mon, 09/01/2014 - 12:12 | 5167740 Soul Glow
Soul Glow's picture

Spain collapses every 50 years so these won't be any good.

Mon, 09/01/2014 - 12:37 | 5167862 silverer
silverer's picture

Of course, there's no risk tied to these at all. 4%, huh?  Such a deal!

Mon, 09/01/2014 - 13:14 | 5167999 joego1
joego1's picture

manana

Mon, 09/01/2014 - 13:30 | 5168067 Jano
Jano's picture

This jew, Singer with the Elliot HF, is already there.

How the hell are they going to pay it at maturity?

 

Mon, 09/01/2014 - 13:42 | 5168088 piratepiet
piratepiet's picture

 

 

From wsj.com : Spanish 10 year yield 2.258<US 10 year yield 2.345

Can we now conclude that US hegemony is over ? ( Have investors more faith in Spain/EU than in the US ? )

Or does this largely reflect different inflation expectations ?

 

 

 

Mon, 09/01/2014 - 13:39 | 5168092 piratepiet
piratepiet's picture

Edit : sorry double post

 

 

Mon, 09/01/2014 - 14:27 | 5168297 ToNYC
ToNYC's picture

Don Lope de Aguirre, the Wrath of God (1972) must have brought the ship home from El Dorado, in spite of those pygmy darts!

Mon, 09/01/2014 - 19:22 | 5169250 fibonacci's claus
fibonacci&#039;s claus's picture

  Bend over.  get that gigantic tub of vaseline.  strap spain in.  tighten those straps!  ohhhhh.  here it comes.  wait for it.  wait for it.  NOW NOW NOW! 

soros is going to make a ton of money in the next nien months

 

Tue, 09/02/2014 - 07:22 | 5170393 AdvancingTime
AdvancingTime's picture

I'm not buying! To make things worse this bond is "Euro" based and the Euro is flawed. Both people and governments have lived beyond their means by taking on debt they cannot repay. Over the last several decades we have created entitlement societies built on the back of the industrial revolution, technological advantages, capital accumulated from the colonial era, and the domination of global finances. Promises were made on the assumption that the advantages we enjoyed would continue.

Ever greater prosperity and entitlements were to be sustained through debt financed consumption growth. In that eerie fantasy world, debt fueled consumption was to be the catalyst to bring about evermore growth. Now reality has begun to come into focus and it is becoming apparent that this is unsustainable. The entitlements and promises that have piled up have become overwhelming. More on why this system will fail in the article below.

http://brucewilds.blogspot.com/2014/08/modern-monetary-theory-is-wrong-d...

Do NOT follow this link or you will be banned from the site!