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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LawsofPhysics's picture

The world is japan!!!  LMFAO!!!

y3maxx's picture

....Here comes "MYRA".

and in Canada, here comes "LOONIERSSP"

DeadFred's picture

Really, what could go wrong?

Haus-Targaryen's picture

Who would actually buy this crap!? 

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.

KnuckleDragger-X's picture

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

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)...

 

 

LawsofPhysics's picture

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

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...

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.

Sudden Debt's picture

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

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

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".

pragmatic hobo's picture

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

garypaul's picture

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

 

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?

LawsofPhysics's picture

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

JustObserving's picture

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

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...

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.

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

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.

 

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.

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...

More_sellers_than_buyers's picture

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

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.

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.

Global Hunter's picture

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

Seize Mars's picture

Ha ha ha ha HA hA

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

Ghordius's picture

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

IANAE's picture

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

 

ThroxxOfVron's picture

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

Check the rate on the US 30yr today..

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.

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.

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.

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.

TrustbutVerify's picture

You are missing the inflation that will likely occur.  

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.

 

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.

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

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. 

silverer's picture

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

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.

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.

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.  

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.