SPAIN AUCTION PREVIEW: Digestion Of Supply An Important Gauge Of Broader Demand

Spain will hold a Bono/Obli and ObliEi auction this morning. On offer will be a shared E4.5-5.5bln of the 3.10% Jul-31 Obli (ISIN: ES0000012N43) alongside the on-the-run 10-year 3.15% Apr-35 Obli (ISIN: ES0000012O67). E250-750mln of the 0.70% Nov-33 Obli-Ei (ISIN: ES0000012C12) will also be on offer.

• The digestion at today’s Spanish (and French) conventional auctions will be an important barometer of broader EGB demand, given the volatility over the last two sessions (these are the first conventional auctions since the German fiscal announcement on Monday night).
• Yesterday’s 30-year German syndication saw books close in excess of E36bln, smaller than the E74bln and E46bln seen on the two 30-year syndications in 2024.
• On the one hand, the recent sell-off may provide an attractive entry point for Spanish paper. However, prospects for further volatility (particularly with the ECB decision this afternoon) could instead tempt some to remain on the sidelines for today’s auctions.
• This will be the first reopening of the 3.15% Apr-35 Obli following the syndicated launch on Jan 22 (in line with our expectations). The launch saw record order books in excess of E143bln for the E15bln issued.
• The 3.10% Jul-31 Obli has been re-opened 5 time since launching in July 2024. The bond has attracted an average bid-to-cover ratio of 1.98x for amounts issued of between E1.2-2.6bln (avg E1.865bln) across those 5 re-openings.
• The 0.70% Nov-33 Obli-Ei was last re-opened in November 2024.