Spain set for tricky funding program

Updated 05 January 2013
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Spain set for tricky funding program

LONDON: Spain will kick off the most challenging 2013 funding program in the euro zone next Thursday with a debt sale that is raising doubts about Madrid's ability to tackle its crisis without financial help.
The auction will refocus investor attention on Europe after a budget deal in the US took center stage at the start of the year, lifting high-yielding assets.
The US deal averted hefty fiscal tightening that could have thrown the world's largest economy into recession. It has created a favorable global market environment so Spain, seen as one of the riskiest sovereigns in the euro zone, should attract strong demand for its debt on Thursday.
However, its choice to start the new year with a new two-year benchmark signals Madrid is taking a prudent stance and is not yet willing to test the market with a longer-dated bond that would be more sensitive to foreign demand. Two-year bonds are protected by the backstop provided by the
European Central Bank which said last year it stood ready to buy short-dated government bonds if a country asks for a bailout from its euro zone partners.
Analysts say that by taking the most cautious route available, Madrid is signaling a lack of confidence in its ability to avoid a bailout.
Spain said earlier it would sell new 2015 bonds and would reopen its 2018 and 2026 lines next week. Taps of old bonds are of less interest to market participants as they usually come in small size.
The last time Spain issued a 10-year benchmark bond was November 2011.



The fact that it has only issued short-term debt in size since then is a major worry for investors because it leads to a high-risk situation in which Madrid needs to pay back an ever-increasing amount of debt in a short period of time.
With no 2023 bond on the maturity curve, pressure is increasing on Madrid to issue a new 10-year benchmark. If it were to encounter problems attracting demand for such an issue that could be a signal that Spain could no longer continue funding on the market without help.
"In the 2023 (sector) there's zero Spanish issuance. It's quite striking, so obviously the 2023 is a prime candidate for issuance and the market knows that and it will be interesting
what its impact is going to be when it does come," Societe Generale rate strategist Ciaran O'Hagan.
"That's effectively the billion euro question."
While total euro zone issuance will fall by 6 percent this year due to austerity measures, Spanish bond supply will jump by about a quarter to 106 billion euros, according to late 2012 estimates from eight banks.
The sheer amount of supply may be too much for markets to digest, analysts said.
"(Spain asking for a bailout) is still our base case scenario, but we understand that it will not happen unless we have a spike in spreads," ING rate strategist Alessandro Giansanti said.
The other euro zone issuers next week are Italy — which like Spain is expected to benefit from the broadly improved appetite for high-yielding assets — and safe havens Germany, Austria and
the Netherlands.
This week's sell-off in core euro zone debt has lifted yields to levels attractive enough to ensure sales go smoothly, analysts said.


Toyota captures data goldmine in $1 billion Grab bet

Updated 5 min 34 sec ago
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Toyota captures data goldmine in $1 billion Grab bet

  • Grab already monitors driving behavior through its app to increase ride safety, sending emails about speed and braking, for instance, to its drivers
  • Toyota and Grab will be able to use the data for possible collaboration on data-driven services such as vehicle diagnostics and customized insurance plans based on driver usage
TOKYO/SINGAPORE: By pumping $1 billion into ride-hailing firm Grab, Toyota Motor stands to gain a passenger-side view of tens of thousands of cars across Southeast Asia, tracking how fast they drive, how far they travel and the time they spend stuck in traffic.
The Japanese automaker said it aims to install its TransLog driving recorder devices into Grab’s fleet of lease cars to access the data on driving patterns that will be crucial to its push into the nascent mobility-as-a-service industry.
“Only ride-hailing companies have good, extensive data on usage, so automakers want to be connected with that,” said Egil Juliussen, director of research for automotive infotainment and advanced driver assistance systems at IHS Markit.
Grab already monitors driving behavior through its app to increase ride safety, sending emails about speed and braking, for instance, to its drivers, such as Singapore’s Rennu MaHajjan.
“With this system, it keeps me in check,” said MaHajjan, 57.
It will get even more vehicle data with Toyota, which has been harvesting data through TransLog since 2016 in sales and trials with taxi firms and car-hailing operators including Grab. The data gives Toyota insight into fleet management as it develops services including futuristic concepts such as pay-per-use mobile restaurants.
The latest deal, announced last week, gives Toyota access to a single pool of vehicles which potentially eclipses all others. That will allow it to capture a volume of data that would be difficult to collect from private cars which are only used for under 5 percent of any given day, often on routine commutes.
In return, Grab will be able to expand services such as food delivery and digital payments using Toyota’s $1 billion investment — the biggest by a traditional automaker in a ride-sharing app maker.
The deal reflects how automakers are clamoring for access to ride-hailing firms’ extensive user bases through a spate of partnerships, as they compete with technology companies to develop autonomous cars and next-generation transport services.
Toyota’s vision of such services includes convoys of shuttle bus-sized, self-driving multi-purpose vehicles used, for instance, as pay-per-use mobile restaurants and hotels, which the automaker plans to develop and customize for retail customers.
“There’s data about the car, and then there’s also data about the service — how many customers drivers have, what’s the average mileage, where the rides are concentrated,” said Juliussen. “Having that picture in all the major (Southeast Asian) cities, that becomes very valuable.”
Toyota and Grab will be able to use the data for possible collaboration on data-driven services such as vehicle diagnostics and customized insurance plans based on driver usage.
The data will also help Grab maintain efficiency in fleet maintenance as it expands deeper into Southeast Asia where it operates in over 200 cities. It has said it wants build the region’s largest car rental fleet by the fourth quarter of 2018.
“Vehicle maintenance costs, insurance costs, these are bread-and-butter issues for ride-hailing drivers,” said Chua Kee Lock, chief executive of Vertex Venture Holdings in Singapore, an early Grab investor.
Industry experts said Toyota could expand its data service to more mobility firms such as Didi Chuxing, Uber Technologies Inc. and Amazon.com Inc, with which it has separate partnerships.
“This partnership with Toyota will keep Grab’s platform ‘sticky’ and give drivers less incentive to switch to competitors,” said Chua. “This is Grab’s edge over the long-run.”