After a week of calm in which the risk premium, which measures the confidence of the market in Spanish sovereign debt, has fallen significantly, Spain has managed to come out with a fresh review of the markets.
Thus, the Public Treasury has achieved its maximum objective and has captured 4,514 million euros in the Auction of Letters to 12 and 18 months held this Tuesday that, in addition, has been settled with marginal interests of 3.20% and 3, 45%, lower than in the previous bid of these denominations.
According to market data, investors have acquired a total of 3,532 million euros in 12-month bills, for which they will charge an interest of 3.20%, lower than the 3.99% recorded in the previous auction, which took place on July 17. Also, the Treasury has placed another 981.6 million euros in Letters to 18 months, with an interest of 3.45%, significantly lower than 4.35% of the aforementioned auction.
Expectations, in the ECB
Since last week, Spanish sovereign debt yields have plummeted due to expectations that the European Central Bank (ECB) will intervene to calm the market, even if Spain has to ask for a ransom.
For example, the yield on the 10-year Spanish bond (the yield offered to investors to buy Spanish debt at 10 years) has dropped to 6.2%, after reaching 7.165% at the beginning of August (still below of the maximum of 7.62% from July 24). In the case of the two-year bond, where operations are focusing more, profitability has fallen to 3.58%, after having reached above 6% at the end of July.
Spain, before a rescue?
After remaining more than a month and a half above 500 basis points and even going so far as to shoot up to around 650, the Spanish resigo premium, the extra cost that investors demand to buy sovereign debt, took a little respite last Thursday, for the proximity of the aid to the bank that the European Union will lend to Spain.
Until we know what decision the ECB takes, we will not take any “ This relaxation in the pressure exerted by investors on our debt is due in large part to the fact that the Government, which takes up its agenda this week after the holidays, has He was willing to ask for help from the Eurogroup, beyond the rescue of the banking already agreed, in exchange for an intervention by the ECB , although it would require new conditions that Spain would have to comply with and which could, according to the analysts, new adjustments.
The ECB announced on 3 August that it was willing to act, but as long as the governments of those countries first asked for help from the rest of the Eurogroup, which could in turn set conditions for that aid . Last week, after dispatching with the king at the Palace of Marivent, in Palma de Mallorca, Rajoy, who a month ago was reluctant, was willing to do so. In June a ransom was requested for the Spanish bank, he said then, adding: “If it seems reasonable, now we will do the same”.
However, the president wants to wait for the European Central Bank to clarify what he is willing to do. “Until we know what decision the ECB takes, we will not take any,” he insisted a week ago from Marivent. For his part, the Economy Minister, Luis de Guindos, said this weekend that the intervention of the European Central Bank (ECB) in the markets to alleviate the pressures on the Spanish debt must be forceful and not have a fixed limit in advance. neither of amount nor duration.
Germany cools expectations
However, the German Central Bank, the Bundesbank, threw a jug of cold water at the markets on Monday and cooled expectations by being very critical of the possibility that the European Central Bank (ECB) makes selective purchases of sovereign bonds. As an argument, he wields “the considerable risks” for the stability that would represent, in his opinion, the intervention in the debt markets by the issuing institute of the euro zone, as pointed out by the president of the entity, Mario Draghi, in his opinion. last press conference.
The consequences of the German criticism did not wait, and the Spanish risk premium slowed down its fall, so that despite reaching the 459 basic points, finally closed the day on Monday at 477. Although that is 17 points less that the 494 of the previous session, are much less than they would have been if there had been no criticism of the Bundesbank. However, this Tuesday continues to fall and at 11.35 it is at 469 points.