- Gross issuance will continue to decrease this year to 209,526 million, 1.6% less than in 2018, and the expected net emission will be 35,000 million
- The Government's commitment to fiscal consolidation will allow the Treasury to continue reducing this year its use of the capital market
- The Treasury closed 2018 with a net issuance of State Debt of 5,723 million euros lower than the 40,000 million budgeted at the beginning of the year
- The average cost of outstanding debt continued to fall in 2018 to 2.39%, the new record low
January 15, 2019.- The Public Treasury has presented its financing strategy for 2019, an exercise in which it will continue reducing Public Debt emissions. Specifically, the gross issue is estimated to reach 209,526 million euros, 1.6% less than last year, while the net issue will be 35,000 million euros, representing a reduction of 5,000 million over the 2018 initial estimate.
The Government's commitment to fiscal consolidation this year will allow the Treasury to continue reducing its gross use of the capital market. In line with this commitment, the objective is to strengthen the reduction of the ratio of public debt to GDP, which would go from 96.9% estimated for the end of 2018 to 95.4% in 2019.
Financial year 2018
The Treasury has completed its 2018 financing program with a total net issue of € 34,277 million. The net issue of Public Debt has been 5,723 million euros lower, 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 decreased by 22%.
The decrease in net issuance has been possible thanks to favorable budgetary execution and more efficient Treasury management. Gross financing stood at 212,964 million euros, the lowest figure since 2011, with a reduction of 7,181 million over the gross issuance forecast at the beginning of the year.
The average cost of outstanding debt has continued to drop to 2.39%, which is a record low. For its part, the average cost of new issues has also remained at a similar figure in 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 sections of the maturity curve throughout the year. This has enabled the Treasury to prepare its portfolio for a possible 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 from 2017.
Another outstanding 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 worth highlighting the realization of three early repayments of the MEDE loan for the recapitalization of the financial system, for an amount of 8,000 million euros. This is the highest amount amortized in a single year and is practically identical to the sum of the disbursements made in the last four years as a whole (9,000 million). These amortizations are especially relevant because they send the market a signal of confidence and financial autonomy and allow cost savings for 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 is worth noting the diversification of the investment base and the progressive recovery of investors that in recent years did not participate in the purchase of public debt, which shows confidence in the Spanish economy. In this regard, the participation of Asian investors in the syndicated issue carried out in June, the largest since 2012, should be highlighted.
Financing Strategy 2019
In 2019, it is estimated that the average cost of outstanding debt will continue to decrease, although it is not foreseeable to maintain the growth rate of average life.
All net financing is expected to be obtained through the issuance of medium and long-term instruments. In this way, the medium and long-term gross issuance will amount to 126,933 million euros, 3.8% less than in 2018.
With regard to the regular issuance of Treasury securities, 48 ordinary auctions of Bills and Government Bonds and Obligations are planned. As a general rule, there will be two auctions per month for each modality. The expected issue in these ordinary auctions will be within the published range, without having to reach the announced maximum.
The Treasury plans to continue this year with its program of Bonds and Obligations indexed to European inflation. It is a program that allows diversifying the investor base of Spanish debt and that favors the stabilization of the financial burden of debt. In the four years in force, the inflation-linked Bonds and Obligations program has accumulated a total volume of 55,516 million euros, which represents 5.3% of the total State Debt in circulation and turns Spain into one of the reference issuers in this market, along with France, Italy and Germany.
In 2019, the Public Treasury will once again turn to the banking unions for the issuance of certain references of State Obligations. You can also call special auctions, outside the usual calendar, to provide liquidity to certain references and thus improve the operation 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 the diversification of the investment base.
