• Gross issuance will continue to decline this year to 209,526 million, 1.6% lower than in 2018, and the expected net issuance will be 35,000 million
  • The Government's commitment to fiscal consolidation will allow the Treasury to continue reducing its use of the capital market this year
  • The Treasury has closed 2018 with a net issuance of lower State Debt at 5,723 million euros to the 40,000 million budgeted at the beginning of the year
  • The average cost of outstanding debt continued to decline in 2018 to 2.39%, a new historical low

January 15, 2019.- The Public Treasury has presented its financing strategy for 2019, a year in which it will continue to reduce Public Debt issues. Specifically, the gross issue is estimated to reach 209,526 million euros, 1.6% lower than last year, while the net issuance will be 35,000 million euros, which represents a reduction of 5,000 million over the initial estimate of 2018.

The Government's commitment to fiscal consolidation will allow the Treasury to continue reducing its gross resource to the capital market this year. In line with this commitment, the objective is to strengthen the reduction of the public debt to GDP ratio, which would go from an estimated 96.9% by the end of 2018 to 95.4% in 2019.

Closing year 2018

The Public Treasury has completed its 2018 financing program with a total net issuance of 34,277 million euros. The net issue of Public Debt has been lower by 5,723 million euros, 14.3% less, than the estimate of 40,000 million made at the beginning of the year. Compared to 2017, the Treasury's net financing needs have been reduced by 22%.

The decrease in net issuance has been possible thanks to the favorable budgetary execution and a more efficient management of the Treasury. Gross financing stood at 212,964 million euros, the lowest figure since 2011, with a reduction of 7,181 million over the planned gross emission at the beginning of the year.

The average cost of outstanding debt has continued to reduce to 2.39%, which is a record low. On the other hand, the average cost of new emissions has also remained at a similar figure to recent years, standing at 0.64%.

As relevant aspects of the 2018 financing program, it should be noted that Spain has been the largest European issuer in the longest tranches of the maturity curve throughout the year. This has allowed the Treasury to have prepared its portfolio for an eventual rise in interest rates in the Eurozone by lengthening the average life of the outstanding debt, which has stood at 7.45 years, compared to 7.13 of 2017.

Another important element has been the improvement of the credit rating of the Kingdom of Spain by the four main rating agencies, which has favored the Treasury's access to a broader investment base.

It is also important to highlight the realization of three early repayments of the MEDE loan for the recapitalization of the financial system, amounting to 8,000 million euros. This is the largest amount amortized in a single year and is practically identical to the sum of disbursements made in the last four years as a whole (9,000 million). These amortizations have special relevance because they launch a sign of confidence and financial autonomy and allow cost savings to the Treasury.

During the past year, the Treasury's contribution to Social Security increased, from 10,192 million euros in 2017 to 13,833 million.

Finally, it should be noted the diversification of the investment base and the progressive recovery of investors who in recent years did not participate in public debt purchases, which shows confidence in the Spanish economy. In this regard, it is important to highlight the participation of Asian investors in the syndicated issue made in June, the largest since 2012.

Financing Strategy 2019

In 2019 it is estimated that the average cost of outstanding debt will continue to fall, although it is not foreseeable that the growth rate of the average life will be maintained.

It is expected that all net financing will be obtained through the issuance of medium and long-term instruments. In this way, the gross emission in the medium and long term will amount to 126,933 million euros, 3.8% lower than in 2018.

As regards the regular issuance of treasury securities, it is planned to hold 48 ordinary auctions of bills and bonds and obligations of the State. As a general rule, two auctions will be held per month of each modality. The expected issuance in these ordinary auctions will be within the published range, without having to reach the maximum announced.

The Treasury plans to continue this year with its European Inflation Bonds and Obligations program. This is a program that allows diversifying the investor base of the Spanish debt and that favors the stabilization of the financial burden of the debt. In the four years of validity, the Bond and Obligations program linked to inflation has accumulated a total volume of 55,516 million euros, representing 5.3% of the total outstanding State Debt and converting Spain into One of the leading issuers in this market, along with France, Italy and Germany.

In 2019, the Public Treasury will once again resort to bank syndicates for the issuance of certain State Obligations references. You can also call special auctions, outside the usual calendar, to provide certain references with liquidity and thus improve the functioning of the secondary market. Finally, the Treasury may issue State Debt through private placements, which will be executed to the extent that they contribute to investment base diversification.

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