(Adds background, secondary performance)
By John Geddie
LONDON, Jan 22 (IFR) - The Kingdom of Spain will price a new EUR7bn 10-year bond later on Tuesday, one of the largest single-tranche bond sales from a sovereign since the onset of the eurozone crisis.
Spain, rated Baa3/BBB-/BBB, received orders approaching EUR23bn for the new bond on Tuesday morning, allowing it to increase the sale from initial expectations of a EUR3-4bn issue.
The success of the deal will allow the country to chip away at its EUR120bn debt-raising target for this year, building on EUR10bn already sold via auction in the last two weeks.
Lead managers - Barclays, BBVA, Citi, Goldman, Santander and Societe Generale - earlier fixed the spread at mid-swaps plus 365bp, inside official guidance of 370bp area, and where they initially tested investors at 375bp area just after markets opened on Tuesday.
That spread offers investors an 11bp new issue premium in swap terms based on where Spain's bonds were trading on the announcement of the deal on Monday afternoon.
An interpolation of Spain's outstanding 5.85% January 2022 and 4.8% January 2024 bonds, bid at swaps plus 350bp and 358bp, placed fair value on the new bonds at 354bp.
When the final spread was set, market conditions showed the bonds would price to yield around 5.4%.
However, since Spain announced it would accept EUR7bn or orders, Spanish yields have widened by around 8bp across its curve as investors position themselves to receive the bonds.
Spain's new bond comes up just shy of an EUR8bn 6.1% August 2015 issue from Greece back in January 2010 on the strength of a EUR20bn order book.
Last week, Italy sold EUR6bn of a new 15-year bond via syndication, and in October last year sold a EUR18bn four-year inflation-linked bond via syndication. (Reporting By John Geddie; Editing by Julian Baker)