LONDON:Spanish bond yields hit a 2016 high on Tuesday as investors, already factoring in risks stemming from inconclusive national elections and a renewed separatist push in Catalonia, geared up for a bumper week of debt issuance in Madrid.
Having lined up 2018, 2020 and 2023 bonds for a 4-5 billion euros auction on Thursday, Spain has also mandated banks for a syndicated sale of a 2026 benchmark in coming days, subject to market conditions.
Its borrowing costs, although low by historical standards, have risen some 15 basis points since the Dec. 20 election left the country in political limbo.
In the wealthy northeastern region of Catalonia, local parties agreed at the weekend to make Carles Puigdemont, the mayor of Girona, the head of a majority separatist Catalan parliament.
The new regional government is expected to resume a push for independence. At national level, a grand coalition of centre-right and centre-left parties proposed by acting Prime Minister Mariano Rajoy failed on Monday to gain support. Spanish 10-year bond yields were 3 basis points up at 1.835 percent, their highest since Dec. 30.
"They will have to pay a price for (developments) ...at national and local level ... but traditionally at the start of the year most syndicated deals and debt auctions tend to go well and I expect that from Spain as well," said KBC rate strategist Mathias van der Jeugt.
"In January everyone is full of cash that needs to be reinvested and that's also why treasuries want to frontload issuance."
Spain will have to compete with Belgium, which also plans a syndicated debt sale of 2026 bonds in the near future having cancelled an auction scheduled for Jan. 18.
On Tuesday, the Netherlands plans to issue 1-1.5 billion euros of 2033 bonds at auction, Austria will sell 1.21 billion euros of 2025 and 2034 bonds, and Germany is set to tap 1 billion euros of a 10-year inflation-linked bond.
On Wednesday, Germany plans to raise 5 billion euros with a 10-year bond and Italy to sell up to 6.75 billion in 2018, 2022 and 2032 bonds.
Ten-year German Bund yields, the benchmark for euro zone borrowing costs, were 3 basis points higher at 0.57 percent.
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