UPDATE 3-Spain sees 60 bln euros of demand for 30-yr bond after market sell-off

·2 min read

(Updates sourcing, adds comments from Spanish Treasury)

By Yoruk Bahceli

Feb 9 (Reuters) - Spain received 60 billion euros of demand for a new 30-year bond on Wednesday, in the euro zone's first major government bond sale since a hawkish turn by the European Central Bank last week sent borrowing costs surging.

The bond, which matures on Oct. 31 2052, will raise 7 billion euros, a source at Spain's Treasury said, adding that the volume was increased from the 6 billion euros initially planned given high demand.

"This is a much higher volume than at the issues at this maturity in 2018 and 2020, and also higher than usual for syndications at this maturity, highlighting investors' interest in Spanish public debt," the source said.

The bond will pay a spread of 10 basis points over Spain's outstanding bond due in October 2050, down from the 12 bps spread indicated when the sale started, memos from lead managers said earlier.

The more hawkish tone adopted by ECB chief Christine Lagarde last Thursday sent bond yields surging as money markets priced in up to 50 basis points worth of rate hikes by the end of the year that would bring the bank's deposit rate to 0%.

Southern European countries such as Spain, which are the biggest beneficiaries of ECB stimulus, have been the worst hit in the sell-off. Bond yields move inversely to prices.

Despite the fall in demand for recent euro zone sovereign bond sales, Spain attracted demand similar to what it saw for a 20-year green bond last September and a 10-year bond in January.

Spanish benchmark 10-year yields are up 37 bps since the start of last week and the risk premium paid over German debt is near the highest since June 2020 at 85 bps.

Analysts estimated the new deal offered a new issue premium of 3-4 bps above Spain's outstanding debt, slightly higher than what Spain has paid on recent deals.

"Now you're getting the bonds at much cheaper levels than last year. Suddenly you're getting a positive yield on Germany, pick-up on these bonds. Outright levels have become a lot more attractive," said Jens Peter Sorensen, chief analyst at Danske Bank.

Wednesday's Spanish debt sale followed one from the European Union, which raised 5 billion euros via the syndicated re-opening of a 30-year bond on Tuesday. That received 64 billion euros of demand, the lowest since the EU started selling bonds to finance its recovery fund last summer.

Thirty-year bonds have performed better than their peers across the market, with their yields rising less than on shorter-dated debt.

In Spain's case, the Treasury source said it opted for a 30-year bond as it issues a new bond in this maturity every two years in February. (Reporting by Yoruk Bahceli, additional reporting by Belen Carreno ; Editing by Catherine Evans and Nick Zieminski)

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