Spanish Auction #Fail As 10Y Borrowing Cost Highest In 5 Months

Heading into the auction saw spreads and yields rallying to around 403bps and 5.77% respectively for 10Y and the EUR rallying solidly over 1.3150 (helping to push the USD down and implicitly S&P futures up). The 2Y started to leak back wider heading into the auction at around 3.37% (perhaps on rotation to bid for the 10Y?) and as the 430ET deadline passed, yields and spreads shifted higher in the 10Y too by 2-3bps. Spain 5Y CDS was 490bps (-5bps) and 10Y a smidge wider at 470bps. The total sold met the hoped for EUR2.5bn with both seeing a rise in bid-to-cover (which we already noted is useless as a statistic given this was the second highest bid-to-cover ever for a 10Y bond). It was the all-important yield that told the tale of the fail which came at its highest in 5 months and almost 35bps cheap to the previous auction and the 3rd highest ever.

  • *SPAIN SELLS EU1.12 B 2014 BONDS
  • *SPAIN SELLS EU1.42B 10-YEAR BONDS
  • *SPAIN 2014 BONDS BID-TO-COVER 3.28
  • *SPAIN 10-YEAR BONDS BID-TO-COVER 2.42 VS 2.17 AT JAN. AUCTION
  • *SPAIN 2014 BONDS AVG YIELD 3.463%
  • *SPAIN 10-YEAR BONDS AVG YIELD 5.743% VS 5.403% IN JAN.

 

Spain 10Y bond auction yield - highest in 5 months and 3rd highest ever...

Spanish Equity index (IBEX) deteriorating rapidly (led by financials)...

UPDATE: 10Y yields are now +8bps from pre-auction and spreads +10bps and 2Y yields are popping even more according to Bloomberg as ES is -8pts off its pre-auction highs and EUR -40 pips from pre-auction. IBEX and broad European equities are off but credit (financials lagging) is deteriorating

Charts: Bloomberg