Wednesday, March 13, 2013


Spain’s making the most of the clement conditions in the bond market.

On Tuesday, the country announced plans to sell three longer-dated bonds at a special auction this week. Unlike scheduled auctions, Thursday’s sale would not have a set size, enabling Spain to take advantage of the recent rally in its debt and raise as much money as it deems fit.

At the same time, if demand is tepid, Spain wouldn’t face the scrutiny that would accompany a conventional auction. Spain normally gives a target range of how much money it aims to raise at an auction, so by not disclosing the size in advance, Spain is giving itself enough room to manoeuvre if conditions suddenly worsen

To be sure, the auction announcement isn’t a complete surprise. The Spanish Treasury indicated in its 2013 strategy in January the option to conduct special auctions, outside of its regular schedule, to provide liquidity to certain nonbenchmark bonds in order to improve the functioning of the market. Thursday’s auction will be the first such auction.

Still, the timing represents an opportunistic move on Spain’s part. For investors sitting on piles of cash who need to generate returns, Spain appears to be a more attractive bet than Italy, for now.