Spain 2010 Net Issuance Down 34% To EUR76.8 Billion
08.02.10, 17:06 Uhr
MADRID -(Dow Jones)- Against a backdrop of rising investor nervousness toward countries with large budget deficits, the Spanish Treasury said Monday it expects its net issuance of bonds and treasury bills to fall 34% in 2010 to EUR76.8 billion.
In a statement, the Treasury said this issuance comprises EUR61.6 billion of bonds and EUR15.2 billion of short-term treasury bills. It said the national debt will rise to 66% of gross domestic product in 2010--much less than the 84% average for the euro zone as forecast by the European Commission.
The treasury forecasts EUR97 billion of gross issuance of bonds in 2010, down from EUR115.1 billion in 2009.
"The supply-induced pressure is lower than last year, though it will still run at a very high level," said David Schnautz, strategist at Commerzbank AG in Frankfurt.
Wilson Chin, strategist at ING Commercial Banking in Amsterdam, said the Spanish Treasury's gross issuance plan of EUR97 billion is "lower than the EUR110 billion we had pencilled in, but it still remains elevated compared with previous years and compared with the Spanish debt market."
Spain recently said its 2009 budget deficit was a higher than expected 11.4% of GDP, far above the 3% of GDP limit for European Union countries. The country raised its deficit forecast for 2010 to 9.5% of GDP and also raised its deficit forecasts for the coming years. Investors responded by selling off Spanish bonds and stocks. The European Commission has given Spain until 2013 to bring its deficit into line with the 3%-of-GDP limit.
Chiara Cremonesi, strategist at UniCredit Bank in London, forecasts Spain's net debt supply will amount to around EUR99 billion in 2010, which is roughly equal to 9.5% of GDP.
"Last year they revised [upward] their issuance a few times and risks to the current deficit forecast [9.5% of GDP in 2010] are skewed to the upside," Cremonesi said.
The Treasury said three- and five-year bonds will be auctioned the first Thursday of each month, and 10-, 15- and 30-year bonds will be auctioned the third Thursday. It said it will maintain its practice of tapping off-the-run, or non-benchmark, bonds at ordinary auctions, in response to investor demand.
The Treasury also said it will reintroduce issues of 18-month treasuries, issuance of which was halted in 2007.
The Treasury plans to tap its existing floating rate bond, maturing October 2012, in the first half of 2010, and also to open up a new source of medium- and long-term funding in the form of private placements. These will notably include a flexible bond-like product known as Schuldschein loans, the cost of which tends to be lower than the euro yield curve.
In terms of new instruments, the Treasury said it will look into the possibility of issuing inflation-linked bonds and, after a series of the issues in U.S. dollars, study the possibility of issuing bonds in other currencies.
The treasury forecasts EUR97 billion of gross issuance of bonds in 2010, down from EUR115.1 billion in 2009.
"The supply-induced pressure is lower than last year, though it will still run at a very high level," said David Schnautz, strategist at Commerzbank AG in Frankfurt.
Wilson Chin, strategist at ING Commercial Banking in Amsterdam, said the Spanish Treasury's gross issuance plan of EUR97 billion is "lower than the EUR110 billion we had pencilled in, but it still remains elevated compared with previous years and compared with the Spanish debt market."
Spain recently said its 2009 budget deficit was a higher than expected 11.4% of GDP, far above the 3% of GDP limit for European Union countries. The country raised its deficit forecast for 2010 to 9.5% of GDP and also raised its deficit forecasts for the coming years. Investors responded by selling off Spanish bonds and stocks. The European Commission has given Spain until 2013 to bring its deficit into line with the 3%-of-GDP limit.
Chiara Cremonesi, strategist at UniCredit Bank in London, forecasts Spain's net debt supply will amount to around EUR99 billion in 2010, which is roughly equal to 9.5% of GDP.
"Last year they revised [upward] their issuance a few times and risks to the current deficit forecast [9.5% of GDP in 2010] are skewed to the upside," Cremonesi said.
The Treasury said three- and five-year bonds will be auctioned the first Thursday of each month, and 10-, 15- and 30-year bonds will be auctioned the third Thursday. It said it will maintain its practice of tapping off-the-run, or non-benchmark, bonds at ordinary auctions, in response to investor demand.
The Treasury also said it will reintroduce issues of 18-month treasuries, issuance of which was halted in 2007.
The Treasury plans to tap its existing floating rate bond, maturing October 2012, in the first half of 2010, and also to open up a new source of medium- and long-term funding in the form of private placements. These will notably include a flexible bond-like product known as Schuldschein loans, the cost of which tends to be lower than the euro yield curve.
In terms of new instruments, the Treasury said it will look into the possibility of issuing inflation-linked bonds and, after a series of the issues in U.S. dollars, study the possibility of issuing bonds in other currencies.
Treasury Web site: www.tesoro.es
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