On Thursday, the Treasury raised EUR 6.535,6 billion in a new auction of long-term bonds, exceeding the EUR 6.5 billion top of the range. Total demand was EUR 12.407,77 million, which is 1.9 times the amount finally awarded. However, costs have risen once again and even doubled the yield on the bonds.
The issue took place after four previous auctions where the Treasury had to increase the cost, and even started paying for 12-month bills. It also came in the wake of the drastic reduction in the IMF’s forecasts. The international organisation predicts a fall in GDP of 8% in 2020 and growth of 4.3% in 2021. Unemployment rates are estimated at 20.8% and 17.5%, respectively.
Specifically, the Treasury raised € 1.968 billion in 3-year bonds, with a 0% coupon, versus demand worth 4.594 billion. The marginal interest rate went from 0.107% registered on April 2nd to 0.266%. Something similar happened with the 5-year bonds, of which EUR 1.193 billion were placed, with a 0% coupon, versus demand worth 2.803 billion. The interest rate rose from 0.276% on March 2 to 0.419%. So the yield practically doubled in both cases.
With the two issues this week, the Treasury has concluded its April calendar and will not return to the markets until May.
The planned net issuance for 2020 will be €32.5 billion, 7.1% lower than the figure proposed last year. But it is 62.8% more than the 19.96 billion finally issued at the end of 2019.
The Treasury’s financing strategy for 2020 contemplates a gross public debt issuance of €196.504 billion, 6.2% down on the figure announced at the start of 2019. It anticipates obtaining all the net financing through the issue of medium- and long-term instruments. The agency also plans to issue its first 20-year green bond in the second half of the year.