Spain joins longer debt issuers’ league

Spain is the latest of Euro Zone countries to take benefits of the aftermath of European Central Bank’s (ECB) bond buying program which has pushed yields to record low.

So far France has issued 50 year debt, while Ireland has tapped into 100 year at yield of 2.35%. Belgium has issued both 50 year and 100 year. Yesterday Switzerland has announced a 42 year debt, while Latvia signaled its first ever 20 year debt.

Today Spain said it will be issuing 50 year bond with coupon expected at 3.5%. Spain already has 50 year debt, which is yielding 3.05%.

With yields at such low levels and investors hungry for more bonds, many countries such as Austria, UK and all of the above have chosen the opportunity to fund government longer term.

While we believe, lending to government at such low rates, doesn’t make much sense but Spain’s order book of €6.75 billion shows demand is very high. In response to demand, Spain has revised its placement size from €2 billion to €3 billion.

With close to $10 trillion worth of bonds, we are having a feeling that there could be bubble in the bond market. More so, when central bankers are suggesting that negative rates have limits.