The public treasury reported a robust auction day this Tuesday, with bids for bills maturing in three and nine months coming in lower than the amount on offer but still reflecting strong investor demand. According to data published by the Bank, the appetite from investors exceeded the planned issuance by a wide margin, underscoring continued confidence in short-term government debt.
In this session, demand exceeded four billion euros, surpassing the supply by more than twice. The ministry, working under the Ministry of Economy, placed 502.08 million euros in three-month government notes even as bids reached 1,687.35 million euros. The marginal yield touched 3.580 percent, just shy of the 3.590 percent recorded at the prior October auction, achieving the highest level since November 2011 in that maturity segment.
Meanwhile, 1,473.97 million euros were issued in nine-month instruments, a figure well short of the investor demand of 3,270.27 million euros. This reference, first launched in February 2013, carried a marginal profitability of 3.705 percent, below the 3.818 percent seen in the previous issue when the market hit a record high for that benchmark.
Retail investors continued to show strong appetite for debt purchases, particularly in the short end of the curve, drawn by attractive yields that have risen since early 2022. Household networks and non-profit entities serving households emerged as the dominant holders of short-term securities, a shift reflected in updated holdings data from the central bank. By August of last year, households had built a substantial stake in short-term debt, rising from modest levels to a material portion of outstanding bills.
The high returns from short-term bills have reshaped the composition of outstanding Treasury stock. The share held by households and non-financial institutions increased markedly from August 2022 to August 2023, highlighting a broad-based shift in investor preferences toward short maturities.
Bonds and longer-dated notes on the calendar for Thursday
Recent auctions have coincided with the European Central Bank leaving rates unchanged after a sequence of hikes, while the United States Federal Reserve also held rates steady for a second consecutive meeting. On Thursday, the Treasury plans to offer between four and five billion euros in new issues to close the month’s issuance cycle. The slate includes three-year government bonds with a coupon of 2.80 percent, ten-year national obligations with a 3.55 percent coupon, and twenty-year notes bearing a 3.45 percent coupon.
Historical yields for these benchmarks show three-year notes averaging around 3.533 percent, ten-year bonds near 4.074 percent, and twenty-year notes around 4.007 percent, reflecting the prevailing market environment and expectations for long-run rates.
2023 outlook and issuance trajectory
The year is expected to feature total gross issuance by the Public Treasury of about 256.93 billion euros, an eight percent rise over the forecast for 2022 in light of higher prevailing interest rates. On the net issuance side, the government announced an anticipated reduction of around five billion euros for 2023, supported by stronger than expected fiscal performance and flexible adherence to targets. As a result, Spain’s net debt issuance is projected to decline modestly from seventy billion euros to about sixty-five billion euros, signaling a tighter debt management stance in a higher-rate environment.
Across the debt spectrum, the strategy emphasizes liquidity and market depth, with continued attention to the balance between short-term funding needs and the cost of longer maturities. The evolving mix of holders, particularly the growing role of households and non-financial institutions in short-term bills, is likely to influence future auctions and the pricing of new issues. Investors remain watchful for shifts in monetary policy that could alter demand patterns for government securities across successive quarters.
Overall, the Treasury’s issuance plan for 2023 reflects a careful calibration of yield, liquidity, and debt sustainability, aimed at supporting public financing while offering competitive opportunities for a broad range of investors across Canada and the United States who follow comparable market dynamics.