• The net appeal to the market is 7,000 million lower than in 2013 and will be obtained through bonds and obligations
  • The average cost of emissions has fallen to 2.45% in 2013, half a point lower than the one registered the previous year
  • Inflation-linked securities may be launched this year, if the right conditions exist

The Spanish Public Treasury today announced the financing strategy for 2014 that qualifies as ambitious and demanding with the market. The net issuance will be less than 7,000 million to the previous year, to a total of 65,000 million euros. The gross issue will amount to about 242,370 million, of which 133,280 million will be in the medium and long term. In 2013, the necessary steps were taken to facilitate the issuance of bonds linked to European inflation, if the appropriate conditions were met.

The objectives of the year just started are based on the fulfillment of the strategy set for 2013 in more complex circumstances than the current ones. The net financing has stood at 71,877 million euros and the gross has amounted to 236,695 million, in both cases slightly higher than expected. The average life of the outstanding debt portfolio of the State has stood at 6.20 years and the average cost of issues has fallen to 2.45%, half a point below that of 2012 (annual average).

For 2014, the Treasury persists in the objectives of lowering the cost, maintaining or extending the average life and diversifying the investor base. It will need a lower appeal to the market in net terms, specifically, 7,000 million below the 2013 figure. The 65,000 million planned include 23,000 million to finance the Autonomous Liquidity Fund (FLA) and will be obtained entirely through medium instruments long term.

Gross financing will amount to some 242,370 million euros, of which 133,280 will be medium and long-term issues, a figure that represents 4,847 million euros more than in 2013. This is due to the higher debt maturities that the Treasury will face. throughout the year and despite the fact that the budgeted state deficit figure is lower. The net issuance of letters is expected to be zero.

Throughout 2013, the Kingdom of Spain has managed to extend the average life of the issues and mitigate the decline in the average life of the outstanding debt portfolio. At the same time, the Treasury has focused on providing, predictably and frequently, liquid securities that serve as a reference in the fixed income market. Along the same lines, this year it will concentrate its medium and long-term financing in its three, five, ten, fifteen and thirty year benchmark tranches.

The modalities for issuing State Debt instruments will not change. The Treasury will cover most of its issues through ordinary auctions of State Bonds and Obligations, following the usual calendar announced at the beginning of the year. As in 2013, the Treasury will have the option to call special auctions, outside its usual calendar, to provide certain references of its yield curve with liquidity and to correct imbalances in the secondary market. These special auctions will be small and will be restricted to the Market Makers of the Kingdom of Spain.

It is also foreseen, as usual, to resort to the method of banking syndicates for the issuance of the first tranches of the State Obligations at ten, fifteen and thirty years, although an Obligation could also be reopened through this formula. The Treasury may also issue through private placements, in which a security is placed directly to an investor.

The pattern of Bonds and Obligations issuance announcements will not be modified. As a general rule, the instruments issued in ordinary Bonds and Obligations auctions will be published at 2:00 p.m. on the Friday before each auction, while the issuance targets will be announced at 2:00 p.m. on the Monday before each auction. Special auctions will be convened and announced two days before they are held, while bank unions will be made public at the time of execution of the operation.

On the other hand, the Public Treasury has been exploring for several years the possibility of issuing Bonds and Obligations indexed to the Harmonized Index of European Consumer Prices, which are already issued by other euro zone countries such as France, Italy or Germany. There is a natural investment base, both national and international, that has a structural need to buy assets that compensate for the loss of its value due to inflation. In this case, they are mostly different investors to those that the Treasury already has access to. Thanks to the other countries that already offer these products, there is also a liquid market in which a new issuer would find its natural reference.

In 2013, the necessary steps have been taken to facilitate the issuance of these assets. If the appropriate circumstances exist, the Public Treasury will be able to launch a program of Bonds and Obligations indexed to European inflation, with a view in the coming years to form a curve of references to which it can provide liquidity through frequent reopening.

Source of the new