- The objectives are to extend the average life of the debt, lower costs and diversify the investment base
- Gross issuance falls to 220,017 million in 2017, more than half through medium and long-term bonds
- The average cost of new issues has fallen to record lows in 2016, down to 0.61%
The Treasury has announced the financing strategy for 2017, a year in which it will make a net issue of 35,000 million euros, the same as the previous year. The gross issue will amount to 220,017 million euros, slightly below the previous year, of which 122,904 will be in the medium and long term. The objectives for this exercise are to lengthen the average life of the debt, reduce costs and diversify the investor base, as in previous years.
These objectives are based on comfortably fulfilling the strategy set in 2016. Net financing stood at € 35,043 million, almost € 10 billion less than forecast at the beginning of the year, thanks to the evolution of public revenues and a use more efficient of the State treasury. The gross issue was 221,364 million euros.
The average cost of new issues during 2016 has continued to decline, from 0.84% a year earlier to 0.61%. The cost of outstanding debt was 2.79% at the end of last year. Both figures are the lowest in recent Treasury history. The good situation and the maintenance of confidence in Spain by investors have allowed these good results.
The average life of the issuance in the medium and long term has been 11.4 years, a figure much higher than that registered the previous year (9.1 years) and more than double that in 2012. This pattern of emissions has contributed to lengthening the average life of the outstanding debt portfolio, from 6.20 years in 2013 to 6.81 years in 2016, thus guaranteeing the sustainability of the State debt in the face of uncertainties in the international environment.
For 2017, the Treasury persists in the objectives of lowering the cost, extending the average life and diversifying the investor base while maintaining the appeal to the market in net terms, up to 35,000 million euros. Gross financing will amount to 220,017 million euros, of which 122,904 million will be in the medium and long term, a figure that is 2,536 million more than in 2016. The issuance of Treasury Bills will be 97,113 million euros, about 3,880 million less than the previous year.
The guideline will not be modified in the ordinary auctions of nominal Bonds and State Obligations with a fixed coupon. As a general rule, these regular auctions will take place on the first and third Thursdays of each month. The expected issuance in ordinary auctions will be within the published range without having to reach the maximum announced, as was done in previous years.
This year the Treasury will continue with the European Inflation Indexed Bonds and Obligations program, which allows diversifying the investor base of Spanish debt. A possible auction of an indexed reference will be incorporated in the first auction of the month. In its first three years of life, this program has accumulated a total volume of 28,544 million euros and has progressively increased its weight in the total Public Debt portfolio to exceed 3% of the total State Debt in circulation. The Kingdom of Spain has become a reference issuer in this market, along with France, Italy and Germany.
As in previous years, the Treasury will use bank syndications to place certain references, although auctions will continue to be the main method of issuing State Debt. In addition, the Treasury will have the option to call special auctions, outside the usual calendar, to provide liquidity to certain references and thus improve the operation of the secondary market. The possibility of resorting to private placements in which a security is issued directly to an investor is also foreseen, under conditions favorable to the State.