Treasury raises interest rate on three-year debt above 3% as investor demand soars | Financial markets

Spanish government debt continues to be the focus of investors’ attention. This Thursday, the Spanish Treasury raised 6.375 million euros in medium- and long-term bonds and bonds, for which it received a demand of 10.900 million. The auction, which coincides with a projected rate cut by the European Central Bank (ECB), will highlight the issuance of three-year bonds, with yields rising above 3%.

In particular, the yield on bonds until 2027 reached 3.051% compared to 2.965% offered at the previous auction. The Treasury placed 1.980 million euros after receiving a demand for 3.580 million (almost double).

The Treasury also issued seven-year bonds with a yield of 3.007%. The award will be $2 billion, compared to a demand of $3.446 million.

In turn, the 15-year commitment (until 2039) increased interest slightly, to 1.399% from the previous 1.335%. At the same time, the Treasury collected 109 million euros and received requests for 510 million.

Finally, the 30-year government bond (due 2054) lowered the interest rate to 3.86% from the previous 4.002%. The organization raised $1.883 million from these emissions and received requests for more than double that amount, $2.878 million.

Last Tuesday, the Treasury already issued €5.135 million worth of short-term debt (six- and 12-month bills), offering lower yields than those it had offered in recent months. Since the ECB decided to start raising interest rates in July 2022 to raise the price of money from the 0% it was then at to 4.5%, Spanish investors have started buying government debt due to significantly higher yields than other countries. conservative products such as deposits or interest-bearing accounts. I remember the queues at the Bank of Spain of overcrowded people waiting to purchase debt instruments.

However, the change in monetary policy that the central bank is expected to make today to implement its first rate cut has already impacted bill yields in the medium to long term. Considering that the rate reduction was expected from the beginning of the year, auctions were waiting for this drop. In the last issue, the six-month notes offered an interest rate of 3.37%, down from the previous 3.554%, and the twelve-month yield fell slightly from 3.424% to 3.423%.

For the remainder of the month, the Treasury will hold a new auction of 3- and 9-month bills next Tuesday and will close out June with a bond and liability auction on Thursday the 20th. In total, the Treasury’s funding strategy for 2024 provides for a new one. Funding needs this year will be about $55 billion, down $10 billion from 2023.

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