PIIGS Banks Watching Rising Spanish Bond Yields (STD, BBVA, AIB, IRE, NBG)

Banking, finance, and taxes

Published: December 14, 2010 9:00 am

Last Updated: April 28, 2020 3:38 am

Tracking European banks, particularly those in the lands of the PIIGS, often requires looking at individual national sovereign debt issues on top of banking-related news. That is the case in Spain today and the banks might at least so far want to consider themselves lucky. Spain sold 2.5 billion euros of Treasury bills, which was below the maximum target of 3 billion euros. The issue is higher rates being paid after a seven-day streak of bond losses resulting in higher yields. The average yield on the 12-month bills was 3.449%, considerably higher than the sales which took place just in November at 2.36%. The 18-month bills sold at 3.72% versus 2.66% from November’s auction.

Banco Santander, S.A. (NYSE: STD) ADRs are up 0.7% at $11.23, up from under $10.00 at the end of November; and Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) is down 1.3% at $10.60 versus $9.21 about two weeks ago.

Irish banks are mixed. Allied Irish Banks plc (NYSE: AIB) is down 0.8% at $1.27 versus a recent low of $0.92 and versus a 52-week low of $0.76. The Bank of Ireland (NYSE: IRE) is up 0.4% at $2.83 compared to $1.44 just about three weeks ago. Irish banks dealt with news yesterday that many bonuses would not be paid out.

In Greece, the National Bank of Greece SA (NYSE: NBG) is up 1.6% at $1.88 versus $1.72 about three weeks ago and versus a 52-week low of $1.65.

The good news is that Spain can still borrow. The bad news is that their bond yields have risen just as you have seen here in the U.S. Another E.U. issue is that Belgian government bonds were weak after Standard & Poor’s cut the outlook on its AA+ credit rating. ECB President Jean-Claude Trichet has also said that European governments should consider extending more commitments to the Euro-area rescue fund to further fight the fiscal crisis.

Watch these borrowing costs. If that continues to rise too much too fast then there are is going to be a fallout all over again on higher debt servicing costs in the E.U. (and the U.S., too).

JON C. OGG

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