Communities sold nearly 5,000 million in debt in just one month

The market, the handful of banks and investment funds that move huge amounts of money and put Governments on tenterhooks, has reconciled with the autonomous communities. Investors again bet on Spanish debt when the European Central Bank (ECB) warned in September that it would take measures to protect the eurozone, and since the beginning of the year and the central Government has authorized it, also the regional debt sold without problems, albeit at a high price. In just one month, six communities have placed at least 4.681 billion euros in securities and the demand, they explain various market sources, has far exceeded the offer and includes a relevant international weight. Highlights the operation of Madrid, who sold the 2,270 million authorized in little more than one day. Followed by Galicia, Aragon, Extremadura or Navarre.

The ECB warned that it will hold the euro - and Spain, if it does lack - and the Government ensures that it will not fall to any community. Thus opened the floodgates of money in summer. Interests that investors demanded to peripherals like Spain and Italy countries eased. The Rescue Fund for the communities, called Fund of regional liquidity (FLA) activated by the Executive to help regions with problems, has instilled a trust similar to the programme of buying Government bonds of the BCE (announced but not activated) If a eurozone country requests financial rescue.

PIMCO, the largest managing fixed income in the world, has come back to Spain. "We have been very cautious until last summer, which means that our exposure to Spanish debt has been very limited," says Lorenzo Pagani, head of European sovereign debt of Pimco Munich, but the change of third in the behaviour of the ECB changed the vision of the Fund. "As a result of that, we increased our investments in Spain, as in Italy, from summer", adds.

Madrid garnered nearly half of the bonds issued so far in 2013

The regional rescue plan, debt offering by the communities in the market enjoy a State guarantee in practice (covered by the ECB at the end of the chain), but with a much more juicy than the Treasury yield. For example, the community of Madrid offered a coupon of 5.75% on February 1 in a private placement of 1 billion to five years, while Treasury paid in its last auction of titles to five years, on February 7, 4.16%. And 5.76% of the titles that Galicia issued to four years on January 30 can be compared with the cited reference of treasure (and its 160 basis points or 1.6 percent difference), or three year bonds auctioned on January 17, which paid the 2.77% (which would imply a surcharge for the Galician of 300 basis points titles(, three percentage points).

'Investors are buying public, almost sovereign risk, but with much greater profitability and that arouses the interest even to the communities that have played host to the FLA,' explains Cesar Cantalapiedra, international financial analysts (AFI). In the same vein, Javier Ferrer, director of the fixed income of Ahorro Corporación table, points out that currently "there is high demand and little paper" especially from "funds Anglo-Saxons who seek high returns". These funds do not find the desired performance values refuge as German bonds, which pay a minimum interest and sometimes even negative.

Regional debt has not traditionally attracted foreign investors. They do not understand very well the autonomic system, are wary of their accounts and do not trust the central Government control over communities and its budgetary commitments. Standards as of the fiscal discipline - that penalises the regions that violate deficit goals and limits its borrowing capacity - have tried, in good part, to mitigate international concerns. Printing has changed, although if there are surprises on the deficit in the aggregate accounts 2012, could be ruined with any progress.

"I think that this fear of regional accounts came from ignorance," explains Lorenzo Pagani, PIMCO, and continues: "the high interest rates seen in the regions in the recent past has encouraged foreign investors to conduct their analysis to understand how the system works and be able to distinguish between regions. Already we cannot speak of fear, but of the correct price in relation to the risk outweighs".

Autonomy must repay some 20 billion this year

The appetite of investors, if maintained, will find offer. The Government authorized last Friday to the nine autonomous communities that have hosted the FLA to issue debt worth more than 20,000 million. This does not imply an increase in indebtedness. That money will be used to cover the repayments provided for this year. Catalonia the main amount corresponds to (8.856,37 million), the rest is divided between Andalusia, Asturias, the Balearic Islands, Canary Islands, Cantabria, Castilla - La Mancha, Murcia and Valencia.

The natural position of many funds, when they are in a neutral position on Spain, "is to have something invested in it risk. Before they were not in that position, so returning to it have been buying", said Ignacio Rodriguez Añino, of M & G Investments.

But the positions of the markets have a very uncertain period. And this 2013 comes curved: regions must reduce its deficit to half (1.5% of GDP in 2012 to 0.7%) and finance 48.020 million, when mandated by the Government in the FLA is some 23,000 million.

Finance; Economic; Business

Finance; Economic; Business

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