Spain’s latest debt operations show a robust appetite from investors, with total funding in the first three quarters of the year reaching two billion 37 million euros and a notable surge in demand across multiple instruments. The three-month to nine-month cycle delivered higher yields compared with the previous month, marking the strongest levels seen since 2011. Issuance activity totaled 559.40 million euros as demand surged, nearly quadrupling the proportional interest at 2,130.08 million euros.
For the letters, the marginal rate rose to 3.818% over nine months, returning to levels seen a decade ago. This compared with 3.737% in the September auction, and the Treasury responded to demand of 3,268.6 million with a loan assignment of 1,478.15 million.
Investor demand again vastly exceeded market supply at the Tuesday auction. Claims surpassed 5,398.69 million euros, more than twice the amount issued.
The commentary from Nadia Calviño, the Vice President and Minister of Economic Affairs, highlighted a plan to reduce net debt issuance by five billion euros in 2023, noting promising progress in the Spanish economy and compliant fiscal targets. This stance places net debt issuance in a range between 65,000 and 70,000 million euros.
The improvement in offered interest rates aligns with the ongoing cycle of higher money prices, supported by the European Central Bank. The ECB maintained conditions that keep investors attracted to Spanish bonds, especially in short-term maturities where profitability remains attractive. Retail buyers have shown persistent interest in short-term debt, with yields elevated since early 2022 and surpassing the fees offered by major banks for deposits.
New inflation-linked European bond
This auction coincided with the issue of a new 15-year inflation-linked European bond, recording demand around 28 billion euros. The Treasury set the issuance size at 3 billion euros.
According to Ministry of Economy sources, this demand exceeds that seen for inflation-linked bonds issued by major European treasuries this year. The strong market reception and the quality of orders reflect investor confidence in the Spanish economy, especially after the release of new forecasts and the reaffirmation of a lower debt-to-GDP trajectory, alongside the confirmation that the financing need for 2023 would be reduced by five billion euros. Three- and nine-month letters were part of the auction mix.