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Sunday, August 14, 2022

Treasury places 5,334 million and begins paying 6-month bills for first time since 2015

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On Thursday, it hopes to place between 4,250 million and 5,750 million in a government bond auction


The Treasury this Tuesday placed 5,333.97 million euros in 6-month and 12-month letters in the expected mid-range and started paying investors for the 6-month reference for the first time since September 2015, according to data released by the bank from Spain.

Investors continue to show interest in Spanish debt as combined demand for both references has exceeded 10,954 million euros, more than double what was eventually awarded in the markets.

Specifically, the agency dependent on the Economy Ministry has placed €1,149.03 million in semi-annual accounts against a claim of €3,184.04 million and the marginal interest rate has been set at 0.134% against the negative rate of -0.055% from the previous auction in June.

In 12-month letters, it placed 4,184.94 million, below the 7,770.95 million demanded by investors, with a marginal yield of 0.702% compared to the previous 0.504%.

In recent auctions, the Treasury has had to pay investors more for debt, coinciding with the Fed raising interest rates and announcements of money price hikes also by the ECB, which has already announced that it will embark on July hikes. Additionally, it comes at a time when the risk premium and yield on the 10-year bond is increasing.

Against this background, the European Central Bank has already announced that it will start flexible reinvestment of the bonds purchased and maturing during the pandemic in July in order to contain risk premiums if necessary.

Also this Tuesday, the Council of Ministers will see the Treasury Department’s report, which confirms that the average life of outstanding debt has been increased while refinancing needs and also the interest rate on outstanding debt have been reduced.


On its side, the Treasury will hold an auction of government bonds on Thursday, at which the public body expects to allocate between 4.250 million and 5.750 million euros.

Specifically, government bonds with a remaining term of 4 years and 1 month with a coupon of 5.90% and a term until July 30, 2026 will be auctioned; Inflation-linked government bonds with a remaining term of 8 years and 5 months, a coupon of 1% and a term until November 30, 2030; 10-year Government Bonds paying a coupon of 2.55% and maturing on October 31, 2032 and 30-year Government Bonds paying a coupon of 1.90% and maturing on October 31, 2052.

Given these auctions, the marginal interest rate in previous issuance was 2.552% for 10-year government bonds with a coupon of 2.55%; at 1.903% for 30-year government bonds with a 1.90% coupon and -1.311% for inflation-linked government bonds with a remaining maturity of 8 years and 5 months at 1%.


In line with the funding strategy, the Treasury maintains its 2022 net debt forecast at 75,000 million, virtually similar to the 2021 figure (75,138 million), while forecasting gross issuance to be reduced by 10% year-on-year to 237,498 million euros.

As in recent years, the bulk of expected gross issuance will be concentrated in Treasury bills, as well as Treasuries and bonds.

Source europapress.es

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