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Spanish Treasury presents its 2020 financing strategy

Wednesday 8 January 2020

The planned net issuance will be 32.5 billion euros, down 7.1% on the figure proposed last year.

The financing programme for 2020 is based on a conservative scenario, which could be revised during the year. The government's commitment to fiscal consolidation and the steady reduction of the deficit means that the ratio of public debt to GDP will continue its accelerating decline.

Close of 2019

The favourable financing conditions have allowed the Public Treasury to complete its financing programme for 2019 with a net issuance of 19.96 billion euros, a reduction of 41.8% on the figure at the close of 2018, the lowest net issuance figure since 2007. This significant reduction has been possible thanks to the positive trend in financing costs, the steady recovery of funding autonomy by the regional governments and more efficient management of the Treasury.

Gross issuance has fallen below 200 billion euros for the first time since 2011 to 192.81 billion euros, 9.5% down on 2018.

Investor confidence in the Spanish economy has been maintained throughout the year. This has resulted in an improved credit rating from Standard & Poor's for the Kingdom of Spain, a reduction in half of the sovereign risk premium and an increase of more than three percentage points in participation by international investors and quality accounts.

The Treasury's financing costs have also continued to decline to all-time lows. The average cost of new issues is 0.23%, a fall of 41 basis points on the figure for 2018. The average cost of outstanding debt has fallen to 2.19%. This reduction has been possible because more than half of the Treasury's debt (55.4%) has been issued at negative rates.

The reduced financing requirements have led to a saving in interest payments over those forecast at the start of the year of 2.37 billion euros. The financial burden of the State is 24.36 billion euros in national accounting terms. This figure has continued to reduce its weight as a percentage of GDP from 2.8% in 2014 to 2%.

These falls have occurred in an environment of growth in the average life of outstanding government debt, which has increased slightly to 7.55 years compared with 7.45 years at the close of 2018.

2020 financing strategy

The main news in 2020 is that the Treasury aims to launch its first issue of a programme of green bonds designed to contribute to the funding of Spain's commitment to ecological transition. For this issue, the Treasury will follow best market practices in designing the Green Bond Framework and refer to the experience of other sovereign issuers and the work of harmonisation at a European level. Transparency will also be guaranteed in the allocation of funds and communication of the impact of investments.

All the net financing is expected to be obtained through the issue of medium- and long-term instruments, which will pay for the medium- and long-term maturities amounting to 84.97 billion euros. Thus, gross medium- and long-term issuance will amount to 117.47 billion euros.

With respect to the regular issue of Treasury securities, 48 ordinary auctions are planned for Treasury notes, bonds and debentures. As a general rule, there will be two auctions a month of each. The expected issuance in these ordinary auctions will be within the published range, without reaching the maximum announced.

In 2020, the Public Treasury will once more turn to bank syndications for the issue of certain kinds of debenture. It will also be able to issue government debt through private placement, if it contributes to the diversification of the investor base.

The Treasury aims to continue this year with its programme of bonds and debentures indexed to European inflation. The programme is designed to diversify the investor base of Spanish debt and stabilise the financial burden of the debt. The five years of the programme of inflation-linked bonds and obligations has accumulated a total of 52.92 billion euros, accounting for 5.4% of all the outstanding government debt, making Spain one of the main issuers in this market, together with France, Italy and Germany.

Non official translation