- With this reduction, the net issuance will amount to 115,000 million euros and the gross issuance to 282,137 million
- Good financing conditions, improved revenue performance, efficient management and prudence in estimating needs have allowed the volume of financing to be reduced
- The Treasury in May reviewed the 2020 financing program to finance the social and economic measures put in place to face the COVID-19 crises
- The Treasury has shown a great capacity to adapt in a complex environment, with the increase in emissions, the creation of new references and the flexibility of auctions
- Issues have registered demand records and the participation of international investors continues to be high, which shows their confidence in Spain
- During the year, the cost of outstanding debt continued to fall, reaching a record low of 1.93% and the average cost of issued debt, which is 0.23%
- The reduction in financing costs will allow the burden of interest on the State and Public Administrations to decrease
- The reduction of the financing program, together with the use of SURE funds, allows the expected emissions to be cut in half for the remainder of the year
The Secretary General of the Treasury and International Financing, Carlos San Basilio, announced today that the Treasury will reduce the volume of net financing planned for 2020 by 15,000 million. In this way, the net issuance will be 115,000 million euros and the gross financing will amount to 282,137 million.
The good financing conditions, as well as the improvement in the evolution of the expected income, the early repayments of the autonomous communities, the prudent estimate made in May, and the effective management of the Treasury have allowed to reduce the volume of financing required this year.
The Public Treasury revised its annual program in May to address the additional financing needs arising from the implementation of social and economic measures to address COVID-19. The agile and rapid response of the Treasury has made it possible to maintain public services in a context of high needs.
Likewise, it has implemented different measures to efficiently manage the increase in financing. The Treasury has increased the size of the auctions and has relaxed the conditions to participate in the second round. The bank syndication procedure has also been used to a greater extent, having issued a nominal volume of 52,000 million euros through five issues.
New references have been issued, highlighting the 7-year issue carried out in March, which was a pioneer in the European market, and the 10-year syndication carried out in April, which was the largest in the history of the capital market and registered the highest demand. registration received by any public or private issuer, up to that moment, for a single reference.
The effort in recent years to expand and deepen the investment base has allowed the weight of non-resident investors to remain at 47%. Likewise, despite the strong increase in investments, the coverage ratio has increased significantly, especially in the longer tranches, which shows investor confidence.
The cost of debt is at historic lows
The average cost of new issues has been decreasing throughout the year and stands at 0.23%, the same level as in 2019. This has allowed the average cost of outstanding debt to continue to fall and to stand at 1.93%, which constitutes a new all-time low. All of this has been possible while the average life of the State Debt portfolio continues to increase to maximum levels, currently standing at 7.75 years.
Despite the increase in financing needs, the reduction in costs will allow the interest payment to decrease and the effort required to meet its payment to be contained.
With the reduction in financing needs for 2020, the Treasury expects gross financing of almost € 32 billion by the end of the year.
Approximately 10 billion is expected to be covered by the new SURE instrument in 2020, once the European Commission has announced the start of its issuance program. These funds will be used to cover the expenses of the different programs launched to reduce the impact on employment of COVID-19. The rest of the funds allocated to Spain, until completing the 21,325 approved, will be received in 2021.
The reduction of the financing program will reduce financing needs from 47,000 to 32,000 until the end of the year, which, together with the use of SURE funds, will reduce the Treasury's use of the capital market in the remainder of the year to 22,000 millions of euros. Therefore, no more syndicated issues are expected in 2020.