Spanish Treasury Meets Short-Term Debt Targets Amid Higher Yields
The public treasury announced this Tuesday that it placed 5,035.03 million euros in short-term debt within the anticipated mid-range, and achieved higher returns for six-month and twelve-month bills, according to data published by the Bank of Spain. These results come as investors welcomed improved rates in step with the European Central Bank’s latest rate increases this year, sustaining strong demand for Spanish securities across a broad market. Overall, demand for both references accounted for a large portion of the Spanish securities market, reaching 9,235.42 million euros, roughly double the amount issued.
Specifically, the treasury allocated 985.03 million euros to six-month bonds, against a demand of 2,650.28 million euros. The marginal return stood at 3.688 percent, up from 3.635 percent in the previous issue. In the auction for twelve-month bonds, an affiliated organization reported 4,050 million euros in issuance with investor demand totaling 6,585.14 million euros. The marginal rate was set at 3.359 percent, above the previous 3.314 percent.
Despite the increase in the fee, the interest offered for these two references did not reach the maximum level observed in the ten-year horizon, which had reached 3.8 percent last year. The Tuesday auction took place after the Governing Council of the European Central Bank decided to keep rates steady. The refinancing rate remains at 4.50 percent, the deposit rate stays at 4.0 percent, and the lending rate is 4.75 percent.
By maintaining these rates for the third consecutive meeting since a pause at the October session following ten consecutive increases, the ECB has kept the currency price at its highest level in over two decades. This stance underscores how monetary policy decisions influence Treasury auctions, with fees to investors rising in tandem with rate hikes and boosting borrowing activity, especially as households participate in Treasury bill purchases.
Households Still The Primary Holders Of Bills
Households and non-profit entities serving households, along with other institutions, held 950 million euros of Treasury bills in November 2022. By November 2023, holdings rose to 23,977 million euros, marking them as the largest holders of short-term debt for the fourth consecutive month. Data from the Bank of Spain, compiled by Europa Press, shows that the high profitability of short-term securities has significantly reshaped the distribution of Treasury bill stocks. Household participation soared from 1.3 percent in November 2022 to over 30 percent in 2023.
Households increased their assets by 4.7 percent compared with October and remained the top holders of Spanish Treasury bonds for the fourth time in history in November, ahead of foreign investors who held 16.737 billion euros but have reduced their holdings since July. After foreign investors, other major holders include monetary financial institutions with 10.918 billion euros, money market funds and other financial intermediaries with 10.189 billion euros, non-financial companies with 6.015 billion euros, and public administrations with 4.104 billion euros.
2024 Treasury Financing Program
The 2024 financing strategy foresees new financing needs of about 55 billion euros for the year, representing a reduction of 10 billion euros compared with 2023. Expected gross issuance is projected at 257.572 billion euros, a two percent increase from 2023 due to higher depreciation, with the majority funded through medium and long-term instruments to maintain the average life of the public debt portfolio.
Regarding regular Treasury bond issuance, the plan includes 48 regular Government Bonds, Bills, and Debt auctions. In 2024, the Treasury will again use syndication for issuing some state obligations. Additional objectives for the year include broadening the investor base and issuing green bonds as a structural element of the financing program, thereby strengthening the sustainable finance market in Spain. (Source: Bank of Spain data and accompanying financial press summaries).