The Treasury will issue 70,000 million this year with rates rising due to inflation

The Treasury will maintain this year the net issuance of debt of 70,000 million euros, at the same level as last year, in a context marked by international uncertainty due to the war and inflation, and coinciding with the rate hike by the European Central Bank to stop the rise in prices. The agency, which has presented its investment strategy for the current year this Thursday, will also have to carry it out in the process of withdrawing sovereign debt purchases by the issuer, which is expected to take place from march.

The Secretary General of the Treasury, Carlos Cuerpo, has made it clear that the strategy is based on a conservative scenario, which could be reviewed throughout the year. This already happened last year when Spain was able to reduce by 5,000 million euros the total of 75,000 million in debt that it had planned to place on the market due to the good performance of the economy which, according to the Body itself, would have grown above the 5% according to the most recent government calculations. The roadmap will also adjust to the disbursement of the European funds linked to the Recovery Plan throughout the year.

In the body attached to the Ministry of Economic Affairs they have removed some iron at the end of debt purchases by the ECB, a mechanism that has allowed the Eurozone economies most affected first by the financial crisis and then by the pandemic to finance themselves at times of particular tension in the markets. In fact, these acquisitions have been taking place relatively recently, since 2015. Currently, the entity led by Christine Lagarde owns 33% of the entire stock of Spanish debt.

We have lived without ECB purchases before

“We have already lived without purchases before,” Carlos Cuerpo recalled, while stressing that the agency hopes that this exit will translate into a “progressive arrival of investors who will take their place without any problem.” Among them, the national bank, which currently has 13.57% of the debt stock. In practice, this is already the case, both in the case of national and international investors, who have increased their appetite for national debt coinciding with the rise in yields that monetary normalization is bringing with it.

Without going any further, the Treasury made its first issue of the year on Wednesday. In the auction of six and 12-month bills, with a historic demand, Spain captured 4,893.4 million but saw the interest to be paid to investors rise to 2.983%, the highest since August 2012. “Despite the rise of 250 basic points in the official rates, the average cost of the State debt has only increased by nine basic points”, up to 1.73% over the last year, explained Cuerpo. This has been possible thanks to the increase in the average life of the portfolio, which, according to him, is around eight years.

Looking ahead to the year in progress, the Treasury expects the upward trend in costs to continue, but in a “contained” way. This will be so thanks to the fact that the country will make progress in reducing the imbalance in its public accounts and that the risk premium (the additional cost that the markets demand from us for issuing debt in relation to what Germany pays for its 10-year bond) will It will also remain relatively contained thanks to the anti-fragmentation mechanism designed by the ECB -the Transmission Protection Instrument for monetary policy or TPI, which it will only use when necessary.

As usual, the agency will speed up debt issuances in the first part of the year. It also plans to reopen the green bond issued in 2021, with the aim of continuing to give it volume until it reaches 20,000 million euros in the coming years (from the 8,200 million currently in circulation).

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