Spanish borrowers have busy start to new year

MADRID Wed Jan 9, 2013 1:26pm GMT

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MADRID Jan 9 (Reuters) - Lender Caixabank and utility Gas Natural both issued bonds on Wednesday, becoming the latest Spanish names to tap improved sentiment towards struggling euro zone economies.

Spanish corporates were shut out of international debt markets for much of 2012 while investors worried over their exposure to a battered domestic market and, in the case of banks, rising bad loans as the euro zone debt crisis rolled on.

Caixabank, Spain's third-biggest lender, saw good demand for a 1 billion euro ($1.3 billion) three-year bond set to be priced at midswaps plus 285 basis points, or just under 3.4 percent, reported IFR, a Thomson Reuters news and analysis service.

Gas Natural gave a guide price of midswaps plus 230-235 basis points for a 600 million euro 10-year bond, around 100 bp lower than 10-year government bonds yielding about 5.1 percent.

"There is a window of opportunity which many companies and banks are going to try to use ... They are coming back (into the bond market) very strongly," RBS analyst Alberto Gallo said.

"But even so, European banks and corporates are issuing less overall. It is important to note this is not to increase debt but to refinance. Banks are shrinking their balance sheets."

BBVA, Spain's second-largest bank, was the first European corporate to test debt markets this year when issuing a 1.5 billion euro five-year bond last Thursday at a similar price to five-year government debt now yielding about 3.85 percent.

On Tuesday, Telefonica, Spain's largest telecoms company, raised 1.5 billion euros at a 4.0 percent yield, while lender Popular issued a 750 million euro 2.5-year bond at a yield of 4.125 percent.

Elsewhere on Wednesday, engineer Abengoa issued a 250 million euro six-year convertible bond.

A pledge in September by the European Central Bank to buy the debt of any country which requested aid helped create a backstop for bets against Spain. While the government has not made any sovereign rescue request, the yield on 10-year government bonds has fallen from a peak at 7.6 percent in July.

Broker Renta 4 said the improved sentiment could be short-lived with Spain expected to remain in recession for the rest of the year and likely to say it has missed its 2012 deficit target.

"We hope more groups take advantage of this opening in the markets, especially when you take in to account the expected restart of tensions on potentially bad news in the future," Renta 4 said in a note.

Spain itself has also been keen to take advantage of the easing risk premium, with state-backed electricity deficit fund (FADE) testing appetite for a new March 2017 bond at around 60 basis points above government bonds on Wednesday, IFR said.

The treasury plans to issue up to 5 billion euros in three bonds on Thursday, in its first visit to the market this year. ($1 = 0.7654 euro) (Editing by Dan Lalor)

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