Households remain the main bearers of bills
Spain’s Treasury reported auctions on Tuesday showing demand for six and twelve month bills in line with expectations while trimming investor yields in both benchmarks. The market remained appetite-driven, with high profitability sustaining investor interest in Spanish securities even as bid rates fell. A notable detail is the absence of a prize reset for the day, with a total issuance not reaching its prior peak.
For the six month notes, the Treasury sold 1,159.51 million euros against bids totaling 2,777.09 million, with a marginal yield of 3.620 percent, down from 3.747 percent previously. In the twelve month issue, the institution linked to the Economy Ministry allotted 2,817.79 million euros on demand totaling 5,432.90 million, setting a marginal rate of 3.327 percent, below the prior level of 3.630 percent. This marked the lowest level since May and reflected a broader decline in government debt yields since early October. The yield on these bills softened as auction demand remained solid and investors continued to seek short term gains.
The Ministry of Economy highlighted strong participation from retail investors, noting that non-competitive bids, which indicate participant intent without price specifics, accounted for a sizable share of the demand and represented about 47 percent. This pattern signals healthy retail engagement in Spain’s short term debt market, even as yields moved lower and risk premiums compressed modestly (five basis points for the 6 month bill and six basis points for the 12 month bill).
Medium and long term debts will be auctioned on Thursday
The auction took place at a moment when households and private non profit institutions serving households held sizable portions of Treasury bills in recent months. Data from the Bank of Spain, compiled by Europa Press, show a notable increase in retail and household holdings through 2023. Household holdings rose sharply as a share of total short term debt, reflecting the attractive yields on bills and the broader market environment, which has supported a continued appetite for Spanish government debt among local investors and some international buyers, including Canadian and U.S. accounts with regional allocations.
As the Bank of Spain data indicate, households and non financial institutions together boosted their share of Treasury bill assets. The shift in asset allocation mirrors a broader European trend toward higher yields and renewed confidence in short term government securities. Within the distribution of holders, foreign investors remain a meaningful but comparatively smaller component behind households, public administrations, and non financial firms. Retail inflows here have been persistent since early 2022, aided by better yields and a stable macro backdrop that resonates with Canadian and American investors evaluating similar short duration credit instruments.
Investors list households as significant holders of Spanish Treasury bonds, consistently ranking ahead of foreign investors, public administrations, and private sector participants. The landscape shows 2023 demand outpacing prior years, with households posting material growth in asset holdings against a backdrop of rising ECB policy rates. In parallel, the improved interest rate environment continues to support the appeal of Spanish bonds to a broad spectrum of buyers across Europe and North America.
Retail interest remains elevated in short term notes, driven by solid yields and the positive distribution of assets, reinforcing the market’s appetite for short dated government debt as 2023 progresses. This dynamic aligns with cautious expectations for rate normalization by major central banks and a continued preference for instruments offering liquidity and predictable returns.
Medium and long-term debts will be auctioned on Thursday
The Treasury plans another issuance window on Thursday for longer dated instruments, with an expected total issuance between 2.5 and 3.5 billion euros. Specifics include Government Debt with a remaining maturity of roughly five years and eleven months and a 0.60 percent coupon, Inflation-Indexed Government Debt with a 0.70 percent coupon, and 15 year Government Debt with a 3.90 percent coupon and a remaining life of ten years. The marginal rates cited for this tender include around 1.55 percent for inflation-linked notes with ten years remaining, 3.295 percent for five year eleven month bonds, and 3.902 percent for fifteen year bonds. Following this auction, the Treasury will return to the markets with shorter postes on December 12, and an initial plan for a December 14 voyage was canceled.
Spain to reduce planned debt issuance by 5 billion
The gross issuance target for the year stands at 256.93 billion euros, reflecting an 8.2 percent increase over the 2022 forecast driven by higher interest rates. On the net side, the First Vice President and Minister of Economic Affairs, Nadia Calviño, announced a cut in planned net issuance for 2023 by 5 billion euros, noting the positive momentum in the Spanish economy and a measured approach to debt management. Calviño emphasized that the net debt issuance would move from 70 billion euros to 65 billion, positioning Spain to stay resilient in a rising rate environment.