Spain considers issuing 50-year government bond

Spain has not ruled out issuing 50-year debt, the head of its treasury told a newspaper, suggesting the market was ripe for what would be the country's longest-ever bond.

“We don’t rule out making a 50-year private placement since demand for ultra-long maturities among international investors has intensified,” Inigo Fernandez de Mesa told Spanish financial daily Expansion in an interview published on Monday.

He also said Spain would slow the pace of its debt issuance for the rest of this year, having already met over 70 per cent of its needs, and continue to issue inflation-linked paper. While the Treasury has raised almost €5 billion on average at each of this year’s scheduled auction, as of August 7th it will aim for an average issuance of €3 billion to €3.5 billion euros, Mr Fernandez de Mesa said. The Treasury has been able to lower its gross medium- and long-term bond target for this year due to improved revenue flow as Spain’s economic recovery gains strength.

Its gross debt issuance target in bonds is now €129 billion this year, down from a previous 133 billion and after it cut its net debt target to €55 billion from 65 billion. Gross debt issuance includes the money the treasury needs to fund the budget deficit, one of the highest in the euro zone, plus the cash it needs to pay down maturing bonds, while net issuance is independent of the cost of expiring bonds.

While €4 billion of the net reduction came from the gross bond issuance plan, the remaining €6 billion would be cut from the T-bills issuance target, Mr Fernandez de Mesa said. The treasury had previously said the net debt reduction would not affect gross issuance plans.

After two successful sales of Spain’s first inflation-linked bond, he said the treasury would continue to issue inflation-linked bonds this year and plans to issue a new five-year bond before the end of the year, depending on market conditions.

The treasury head also confirmed that the second scheduled bond auction in August would not be held, as is customary during the holiday month. The longest-dated bond that Spain has so far issued carries a 31-year maturity.

Reuters