Sabadell bank has decided to enter the bond wars with aplomb. This Monday it will put together a collection of basic bonds with annual yields of 4.25%. The product is not a certificate of deposit, but a debt purchase, so the lender will not face penalties associated with high-yield bond issues that the government put in place before the summer. Most lenders offering high yields must pay a small percentage to the Guarantee Fund (Fondo de Garantia in Spanish).
The initiative is somewhat of a novelty in the sector, and experts suggest that other lenders could follow Sabadell's lead and issue similar returns on debt. The driving motivation for the debt issues is to re-open the debt market for the Spanish financial system after the door was slammed shut in May due to the peripheral crisis.
With Sabadell's 18-month bond issue, the lender is trying to capture 300 million euros and gain enough liquidity to continue their growth strategy as outlined in the Plan Crea. In this plan, they had predicted a 5.5% increase in available credit and a 10% increase in profits through 2013. Clients will be able purchase their bonds until September 29.
