Spain is seeking to extend guarantees on about 80 billion euros ($113 billion) of bank bonds beyond the end of June to help lenders’ access to funding.

The government asked the European Commission for an additional six months for the backing first made during the credit crisis in 2008, according to a Madrid-based official at the Spanish Treasury, who declined to be identified because of ministry policy.
Spanish lenders are under pressure as the deficit crisis that triggered bailouts of Greece, Portugal and Ireland makes investors wary of bank debt. Bondholders want 189 basis points in extra yield to buy a five-year Spanish covered bond, the most popular type of debt issued by the country’s banks, instead of a note issued by a German lender. The difference was 143 basis points in April, according to data compiled by Bloomberg.
“Clearly, this move signals that the overall funding conditions for some Spanish banks remain challenging and that for some issuers capital market access is limited,” said Leef Dierks, a London-based analyst at Morgan Stanley.
The nation’s largest lenders, Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA, haven’t sold government guaranteed bonds after raising the equivalent to $91 billion by selling debt including covered bonds and unsecured debt since January 2010, according to Bloomberg data.

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