TRANSCRIPT: Interview with Spanish Treasury’s Pablo de Ramón-Laca Clausen on 7 May 2021

11 May 2021

By David Barwick – FRANKFURT (Econostream) – Following is the full transcript of the interview conducted by Econostream on May 7 with Pablo de Ramón-Laca Clausen, General Director of the Tesoro and Financial Policy, Spain’s sovereign debt issuer:

Q: Where do things stand now in terms of Spanish debt issuance, and how did we get here?


A: At the beginning of last year, we were gradually reducing our issuance, as the deficit came under control, and we had announced €32.5 billion in net terms. But it became very clear in February or March that this would have to increase. We decided rather than updating our issuance targets very frequently like others did, we would pick the right moments to make our announcements. So there would be fewer announcements, but we could provide some certainty as to what the plan was. And so in May we revised the amount upwards from €32.5 billion to €130 billion, because we knew that with the biggest crisis in real terms since the Civil War, tax revenues were going to fall. It was very difficult to contemplate in the first lockdown how firms and consumers were even going to be able to pay taxes. And so in the second quarter we issued more than we had every issued in any previous quarter. We did a 7-year in March, we did a 10-year in April. We did a lot of syndications in quick succession, and they were huge, like €15 billion. We thought – wisely, I believe – that in those circumstances it’s best to issue first and ask questions later. Faced with such uncertainty, cash management was a secondary consideration. It was better to have cash and not need it then to need it and not have it.

At the end of the summer, though, it became obvious that our revenues had not suffered as much as we thought they might. We had been too conservative in our estimate. Yes, we had the biggest fall in GDP since the Civil War, but due to the furlough schemes, credit moratoria, government guaranteed loans etc, people could still afford to pay their taxes. We realised that our issuance target revision had gone too far, and we had to slow down towards the end of the third quarter and into the fourth. This brought us the problem of a reduction in our auction sizes to painfully small, almost insignificant volumes. A DMO needs to maintain a regular presence in the market. But it was something we had to do, because nobody wanted to end the year with more cash than needed and with a bigger debt-to-GDP ratio than absolutely necessary. It’s true the paradigm has changed and having a high debt-to-GDP ratio is no longer seen in the same negative light as in 2013. But it’s still something rating agencies and investors look at, so one cannot be too far removed from the thinking that a country with a high debt-to-GDP ratio is vulnerable. So the extended lockdown brought about a lot of uncertainty, overshooting in terms of issuance in the second quarter, and then a gradual retrenchment as we realised that it wasn’t a normal crisis.

This year, we expect the same phenomenon, but in a milder way, because there is more certainty. We had a first quarter that was worse than anticipated, with negative growth because of the international environment, lockdowns in other countries, regional lockdowns in Spain, and of course the slowdown in the pace of vaccination hasn’t helped. So we announced €100 billion in net terms. We’re still faced with significant uncertainty with respect to our other sources of funding. There is uncertainty with respect to tax revenues, because these always depend on GDP growth and now also obviously on the success of the vaccination campaign. There is also uncertainty with respect to the regions’ repayment of loans that the central government had extended to them: we are allowing them to redeem early debt incurred under the liquidity mechanisms. They just have to find investors who are willing to lend to them under more advantageous conditions than the rate we negotiated a few years ago, which is likely, because rates are much lower now. So the central government is allowing them to redeem early the loans extended them as an emergency measure, because we understand that in our decentralised system with financial autonomy for the regions, the central government is not the ideal creditor for the regional governments. In effect, they are doing to us what we have been doing for the past few years to the ESM: returning money early and forcing them to forgo higher interest payments that were established when rates were higher. So, like tax revenues, that is an uncertain source of funding. And then, obviously, there’s the timing of the European funds. Since it depends on each Member State’s ratification process, we don’t always know exactly when they’re going to be issued or exactly how much we’re going to receive this year.

The adjustment variable to all this is the Treasury’s funding programme. We expect to revise downwards our initial €100 billion figure, since it was a very conservative estimate. By the summer we will be able to reduce that. It’s better to announce something big and then reduce than to announce something small and then increase. Different governments have different approaches, and they’re all perfectly legitimate, but we prefer to give the market a little bit of certainty and then rein it back. That means issuing when the market’s hot – at the beginning of the year – and as investors fill their books and demand shuts down for the year, that’s when we reduce our funding. That’s basically the effect of the lockdown. It brings uncertainty, and if you want to be extra conservative, you have to issue a lot and then retrench. It’s harder to maintain a very tight cash position.

Q: How do you deal with such uncertainty from an operational standpoint?

A: We’re already equipped with extremely powerful tools to deal with this uncertainty. A modern sovereign debt management office has multiple strings it can pull. There are auctions; these can vary in size and we can incentivise them any way we want. There is a greenshoe option, Italy is remunerating auction participation, and so on. There are many things we can tweak in auctions. We used to auction three non-inflation-linked bonds per auction; we increased it to four. And that increases the size that we can issue in total by about 20%. So that is very, very flexible. There are also T-bills. The bid-to-cover ratio of a 3-month T-bill is usually up in the stratosphere, around eight times. We can issue a lot of 3-month T-bills below the ECB’s deposit rate. So in case of emergency cash needs, there are always T-bills. We usually issue only €500 million in 3-month T-bills, because this is money we don’t need and are going to return in three months anyway. But if we needed the cash, we could increase that to €2 or €3 billion, and it would still make sense from a taxpayer’s perspective. Then there are syndications, and these can vary very widely, from €4 or €5 billion to €15 billion. That’s very, very flexible. So we’re already equipped with a flexible toolkit. Some DMOs, not us in recent years, also issue in foreign currencies. We think the euro is a reserve currency and it makes less sense for us to issue in US dollars, for example. And some of us are diversifying into green bonds. But if we do a green bond, it is not necessarily only to diversify our investor base or to adapt to bigger funding needs. You do it to signal commitment to the green transition, which is very, very important, and you do it to encourage an infrastructure to create a safe asset against which other green bonds within your own national jurisdiction can be priced.

Q: On the subject, can you share any further insights into your expectation of a new green bond this summer in the €5-10 billion range?

A: We announced in January that in the second half of this year we would issue a green bond. It will happen after the summer. We are currently drafting the green bond framework to find eligible expenditures, because whatever expenditures are put into the Recovery, Transformation and Resilience Plan, the EU Commission will want to issue its own green bond. And therefore, we can’t assign such a project, even if it’s in our budget, to the green bond. This year is arguably a bad year to issue a green bond, because we have crowding out of projects by the Commission. We will make sure that investors are clear that we’re not over-issuing, that everything is assigned to a particular item that isn’t funded by someone else. So it’ll be smaller than what you’ve seen other sovereigns do, but it will still be a liquid benchmark. We said between €5 and €10 billion, but given how we’ve designed the European programme, it will be closer to the lower end of that, because the Commission’s going to be financing the rest. We said around 20 years for the maturity and that sounds about right.

Q: Can you say anything about syndication plans, including maturities of particular focus?

A: We aspire to be predictable. Every year we do two 10-years, usually one in January and one right before the summer. Our programme usually pivots around filling two 10-year bonds. They get filled through up to around €20 billion, and around that 10-year, central part of the strategy, we issue longer than ten years or shorter than ten years. If we want to increase the average life, we issue more intensively longer than ten years. If we want to decrease the average life and therefore reduce the cost, we issue more intensively in the short term. So the market expects a second 10-year before the summer, as usual. The market expects the green bond we announced in January. We’ve already done three syndications: the 10-year, the 15-year and the 50-year, very successfully. What’s left? At least another 10-year, and the green bond. And we usually do around four syndications a year. That would put us at five, four plus one extraordinary one, which is the green bond. In that sense, it is a pretty normal year. We usually syndicate slightly under 20% of our medium- to long-term gross funding. This year is likely to be closer to 18%, which is at the lower end of what we usually do. Last year was higher than 20% because of the reasons I mentioned: we thought we were going to have to issue a lot more than we ultimately had to.

Q: With regard to the second 10-year, could “before the summer” mean in June?

A: We’ve done it in July before. But it will be before the summer break, which in the European capital markets usually begins on Bastille Day, July 14.

Q: Are you worried about a shift in demand away from longer-dated tenors, such that future syndications at the longer end of your curve might not be as successful?

A: It depends on how you define successful. Is it measured by the size of demand? I would say no, I’m not worried. When you syndicate a bond, some hedge funds know they won’t get a lot of allocation. It’s moot for a hedge fund to put in a bid of €2 billion. They know I’m not going to allocate €2 billion to them; it’ll be a tiny fraction of that. When they put their order in, it is, first of all, for us to notice them in the book. It’s the only way they can distinguish themselves. So I would say the total size of the book when you’re building the book is a signal that contains a lot of noise. Take the 10-year in January, for example. When we announced the first price indication, the book rose to €130 billion. But how much of that was allocatable? About half. The rest was fluff – non-allocatable orders that fast money investors put there to attract attention.

So then we see the book and see where the real money is and where the fast money is, and we see that of that €130 billion, about €60 billion is actually good. There is enough interest out there to issue €10 billion, which is what we want to do, so we tighten the price. When we tighten the price, some hedge funds storm out. Perhaps it’s to provoke the headline and make us reconsider, because the headline in the case of the 10-year was, “Spanish Treasury Loses €75 Billion of Orders”. But that left us with €55 billion of extremely high-quality investors, and we were able to allocate €10 billion, under-allocate several real money accounts and create a healthy price tension. From the headline, you’d think this was a less successful transaction. I would say success is measured by how you achieve your target issuance and what quality you’re ultimately able to allocate. Not by the size of the book. And I say this because DMOs have often succumbed to the temptation of linking success to a very large book. And that gives these hedge funds the power to remove their huge offers – that is, their inflated bids – and influence the DMO.

Consider the 50-year, which the ECB cannot touch; we are leaping without a safety net. When we issue and there is €65 billion of demand for an SPGB 50-year, I would say it’s a huge success in that sense. A lot of that was hedge funds, but we were able to allocate at high quality. What we issue is for investors to keep in their books and for this to be trading, and we don’t want to allocate it to a hedge fund that’s going to flip it very quickly. Because for every sale there is someone who buys and we don’t want to overburden balance sheets with heavy bonds. So I would say success is based on how much you issue and at what quality. Spanish investors only took about 8% of this bond, while 92% went to non-residents. And pension and insurance investors took 35%, which, at the ultra-long end, is who you want to issue for. They’re the ones who have liabilities that are long enough that they want to match with your very long-term asset.

So I would dispute that these issuances were less successful. Success shouldn’t be measured by size of demand, because size of demand can acquire an arbitrariness that gives fast money a lot of power over the optics of the final transaction. If you link your self-esteem to the sheer size of the order book, then you’re making yourself vulnerable to them.

Q: As the recovery progresses, though, and things increasingly return to normal, also with respect to monetary policy, could this change?

A: I find it difficult to envision. There is a phenomenon that’s hard to understand for some people, but we have to keep insisting on it: what’s important is not the level of indebtedness, but rather the cost of funding, the average life of the portfolio and the interest burden. A low cost of funding combined with a high average life of issuance leads to a falling interest burden. For example, ten years ago, we issued a 10-year bond at 5.5%. That bond redeems this year. It’s been paying 5.5% interest for the past 10 years. This year, that bond disappears from our portfolio and is replaced by a bond issued at 0.2%, 530 basis points cheaper, for another 10 years. And the same happens with the 5-years, with the 3-years, etc. It’s the path dependence of where we come from that determines the interest burden in the next few years. As long as rates are low, the interest burden keeps falling. Every year we are paying less in absolute and in relative terms because of the path dependence of rates.

How much do rates have to increase for that to be reversed? Well, from the current 0.2% up to 550 basis points of the 10-year bond that’s disappearing from our portfolio, there is a lot of distance. So interest rates could increase by 200 basis points and the same would apply.  How long for? It depends on your models, but as long as current rates are low and as long as I’m issuing at an average life of 10 years, this can be maintained for two or three years. This is the opportunity that DMOs have now. And there is European money coming in to structurally increase GDP growth, which is ultimately what ensures debt sustainability. We have a two- to three-year period in which we know our interest payments won’t increase, even if the yield curves shift upwards. If yield curves shift upwards long enough, then ultimately interest payments will increase, but there is a two-year delay for that to happen. And this is the opportunity that we have. So I’m very comfortable in that respect.

Q: It sounds like you’re satisfied with the level of predictability you’re facing, at least in terms of future interest payments.

A: In terms of debt sustainability and affordability, yes, we are, and it’s a very nice thing to have. It’s a relief. But in terms of issuance, no, we have to be flexible, because we still have a lot of uncertainty for all those reasons I mentioned earlier.

Q: Where is the average maturity of your portfolio headed?

A: The average life of our portfolio right now exceeds eight years, and we’ve been increasing it steadily from 6.2 years in 2013. That’s no mean feat; increasing average life by almost two years when you have €1.3 trillion outstanding is a big deal. So we’re locking in the current rates for an average of 8.1 years. And the average life of the medium- and long-term bonds that we issue – not including T-Bills issued and  maturing this year, which are almost irrelevant for these purposes – is higher than it’s ever been, at 13 years. The average yield of everything we have outstanding is at 1.69% now, but is falling and will continue to fall.

How do we do this? We issue less intensively in shorter tenors, and more intensively in longer tenors. Because when you have a €1.3 trillion book of debt, you can’t just say you’re only going to do 30 years. The market would be stuffed with long-end bonds, and spit them back out. So it has to be done very carefully and gradually. We are intensively issuing above 15 years, but it all pivots around the 10-year issuance. And the average life at issuance of Bonos and Obligaciones is higher than it’s ever been at 13 years. We can’t overdo it in the 30-year or 50-year space, because we have to be very conscious of our investor base. We know who we are issuing for. Spain has a structural vulnerability, which is a lack of long-term savings. We don’t have a very big natural investor base in the 30-year space.

And this is why part of our issuance programme is to fund the pension system, because we chronically under-save, given our demographics. This is one of the things that we have to fix. Italy for example has a different situation. Yes, they have a very indebted public sector, but a private sector that has net assets. We have an indebted private sector. So they, like France as well, can issue a lot of 30-years, because they’re in a much healthier macroeconomic position in this respect. Every time we issue 50-years or 30-years, most of it goes to non-residents, because we don’t have a lot of Spanish savings to invest with such a horizon.

Q: Then going beyond that 50-year horizon would be out of the question?

A: It would make very little sense. I know some investors who want to have a 50-year in their portfolio to maturity, given their long-term liabilities. I don’t know anyone with 100-year liabilities. I do know market participants who want that convexity and who want to trade it, but if they buy it, they are just going to sell the bond at some point, and someone’s going to end up with it on their balance sheet. There might be investors that want to keep it for an extended period of time, but to me those investors are few and far between. Ireland for example did a private placement in that tenor. That makes sense, because if you can find the investor that really wants it, then fine, but not to do a benchmark bond. For Spain at least, I don’t think there is a structural demand. I know there is fast-money demand for 100-years, but when we issue, we issue for the structural, real money investor, because that’s the one that’s going to end up with this on their balance sheet. Fast money provides liquidity, and they are essential to the transaction, but that’s not who we issue for.

Q: Are there any investor segments not being reached that you’d like to reach?

A: Given the circumstances of Spain and our rating category, we are satisfied with where we are. We always want to deepen and widen our investor base, and we think we’re very successful at it. Monetary policy obviously always crowds someone out, being such a big investor, but who is getting crowded out? It’s the domestic investors that are being crowded out. Non-residents as a proportion are more or less stable, and this is our success. We don’t want to be too dependent on our domestic investors, because we have a negative net international investment position and need money from abroad to finance our economy, and we need our domestic banks’ balance sheets to be put to play in lending to the private sector. So it’s a good thing to have the Spanish banks as investors, but we’re issuing for the non-residents.

Out of the non-residents, from which would we like to attract more investment? Of course, official institutions and central banks, but we are in a rating category that does not qualify us for a lot of foreign exchange transactions. When we were a AAA, we were on the shopping list of central banks that wanted to have an extremely safe, liquid, diversified asset of a AAA category. Now that we are A- – and Moody’s has us at BBB+ - we don’t quite qualify. My job and the job of the Spanish government is to convince rating agencies that we are structurally changing for that rating improvement to occur. Every time we are upgraded, more floodgates open for other investors. So am I satisfied with our current level of investors, given our rating? Yes, I’m satisfied. I think we have a very healthy investor base in Asia, in Europe, in Spain as well of course, in the US, and in the different investor categories. But our mission is to improve the rating and to qualify for more categories of investor.

Q: What are your expectations for an improvement in the rating?

A: We were on our way up before the pandemic. It was only Moody’s that was resisting the move to the A category. Admirably, rating agencies have paused in their downgrading of countries during the pandemic. I think the only European country that was downgraded in 2020 was Italy, but they already had a negative outlook. Nobody has downgraded Spain. What we’ve seen is a move from stable to negative by Standard and Poor’s, but we are rated A rather than then the A- average, so given Standard and Poor’s already rated us higher than our peers, a negative outlook is less harmful than if Moody’s did it.

Now they’re waiting to see what investment and reform plans we present to Brussels before they decide whether to upgrade us or not. But they’ve been remarkably patient and I think they need to be commended for that. Because this time around, as opposed to 2012, there was a very concerted and coordinated European response. So they could have decided to do as in 2012 and downgraded everyone except for Germany, but they didn’t. I think we will persist where we are in terms of our rating, even though we have a higher debt-to-GDP ratio, because the paradigm has changed and the interest burden is lower every year, which I think they realise. They know that debt is sustainable and that European institutions’ response is very significant this time – not just monetary policy but fiscal policy and politically as well – so I think over the next couple of years we can expect upgrades if the programme is implemented well.

Q: When Greece regains investment grade status, will that have a noticeable impact on your issuance, to the extent Greece is competing with you for the same investors?

A: When investors buy Spain, they are buying two things. They are buying Spain within the euro and they are buying the euro. Greece’s upgrade will mean stronger prospects not just for Greece, but also for the euro. Not many investors will shift away from Spain within the euro just because Greece regains investment grade. If there is such an effect, it will be marginal. But the effect with respect to the prospects for the whole of the Eurozone will be very significant and positive, and Spain will benefit from that.

This is related to the question of whether the EU Commission issuance will crowd us out. After all, they’re going to issue a lot and might compete with us for the same investors. But that would sooner be a problem for those countries whose bonds have behaved like a safe asset in the past, meaning Germany and France. They were the safe-asset proxy for Europe, because there is no US Treasury equivalent in Europe. So that might crowd out a little bit of demand for Bunds or OATs. But for us, the availability of a safe asset crowds us into a larger portfolio.

Put it this way: a Japanese pension fund can buy more Spanish or Italian bonds if they can have a bigger European government bond portfolio. And the size of their European government bond portfolio is determined by how much in safe assets they can have at the bottom of the risk spectrum. Once they get through buying however much in Bunds they can find in the market, which may not be a lot, and then add to that a little of OATs, then they’ll have a safe component and can start building their risk in the portfolio, so they buy a little bit of Italy, a little bit of Spain, but limited to how much in safe assets there is in that book. Having more safe assets will allow them to buy more of us.

Something similar happens with Greece when it returns to investment grade status. When investors are buying us, they’re buying Spain in relative terms, and that can lead to a marginal effect. But the other effect is that the Japanese pension fund will be more encouraged to buy European government bonds in general if Greece does well.

Q: How do you assess the current risk premium of Spanish sovereign bonds at a bit under 70 basis points?

A: It’s been very stable for a long time, and I think the ECB has been very successful, even though it doesn’t try to contain spreads as its primary objective. But what the ECB does ultimately results in spreads being contained. In absolute terms, we are at levels of 2019. In relative terms, we were at this level in January 2020, so I would say the concerted European response to this has maintained the relative prices. I think that’s likely to continue as long as the pandemic crisis is there. The ECB’s public sector purchase programme buys two euros of Bunds for every one euro of SPGBs. So just by that, the spread should increase, because Bunds would become a lot scarcer a lot quicker than SPGBs. So the buying of assets is not designed to contain the spread. But at the same time, the ECB has been ensuring favourable financing conditions, so the market’s not concerned that Spain is going to get into trouble, and that’s why it’s stable at 67. I think it’s likely to continue that way. Ideally, we would compress the spread even more, but that would involve more real economy factors like growth, structural reform, unemployment reduction, etc. But I think the low current levels reflect the market’s confidence that the euro will survive this and be stronger at the end of it.

Q: How else do the ECB’s asset purchases affect what you’re doing, in particular with regard to liquidity?

A: Fortunately, we have a liquid market. The ECB owns less than 30% of our debt. So, 70% is still out there. It’s not the same situation in Bunds, and of course in smaller issuing countries, where there are more concerns about liquidity. But the upside of a bad thing, namely having a lot of debt, is that we can afford to have a liquid market. And every year we have a lot of funding needs, so we have to do a lot of issuance, and at the same time we replace a lot of outstanding issuance, which also maintains liquidity. So I’m not as concerned.

Some DMOs improve liquidity through buybacks and swaps, buying back what’s illiquid and swapping it for something that’s more needed, maintaining liquidity throughout the curve. Because we have a lot of funding needs, we can afford to be a simpler operation, just issuing in certain tenors and not in others. We don’t have to do buybacks. But we’re not as concerned there because we issue a lot. Other countries with less debt outstanding and lower yearly funding needs will have a harder time maintaining liquidity throughout the ECB’s QE. They would have to carry out operations that in net terms don’t amount to more debt, meaning an exchange where they buy back and issue as needed. We don’t have to.

Q: Concerns about a tightening of ECB policy are often expressed in terms of the impact on peripheral countries like Spain, and yet it sounds like there’s no reason for concern with respect to sovereign debt.

A: There will be an impact, but that impact will be manageable as long as financing conditions remain favourable. And I’m persuaded by the Governing Council’s manifestations that whatever they do, they will ensure favourable financing conditions for the real economy, which means for us as well. What happened in 2012 was that we had was redenomination risk; the market thought that the spread between Spain and Germany had increased so much that the euro was about to break up. In which case Spain would devalue, and nobody wants to buy an asset in a currency that’s going to be worth less in a few days. And so investors piled into Germany, because they thought it would revalue and everybody wants to buy an asset that’s going to be worth more in the same few days. Germany was overvalued because of that. It’s not that investors thought Germany was particularly safe; they were speculating that it was going to revalue. Hence the increase in spreads.

If the Governing Council has now understood, as I think it has, that the increase in spreads is what’s to be avoided, then as long as favourable financing conditions are maintained in the legitimate exercise of monetary policy, whatever the ECB does won’t spell too much trouble for us. The bottom line is that our debt becomes more sustainable if we do our real economy homework, if we get the vaccination campaign right, if we implement structural reforms and grow. And that’s how it should be, and everything else less relevant. As long as we do what we have to do, I’m relatively calm.

Q: Your attitude of calmness would thus also apply to the debt-to-GDP ratio of Spain?

A: There are several dimensions to it. In 2008, our ratio was 35% and we were rated AAA. Now, it’s 120%. But in terms of revenues, the cost of that 35% of GDP is the same as that of 120%. Having a ratio of 120% is in many ways unfair for the next generations; my four-year-old son is incurring debt to pay his grandparents’ pension. But in terms of its total revenues, it costs the taxpayer the same as when we were a AAA with 35%.

So, the paradigm has changed. The Maastricht criteria were calibrated on the basis of data from the 1980s, and that’s where we got the 60% debt-to-GDP and 3% deficit-to-GDP ratios of the criteria. Right now, for many reasons having to do with trade, technology and demographics, we have structurally lower yield curves, even negative rates, implying different absolute debt-to-GDP levels and how concerned we should be by them.

Our current 120% we are determined to reduce gradually, without hurting the rest of the economy, because it is unfair. But we are less concerned than we would have been in the 1980s even if rates were at the same levels then. Germany is approaching a debt-to-GDP ratio of 90%, but their interest burden is approaching zero, which will surprise many economists, but it is a new world in which debt-to-GDP ratios don’t mean the same for the macroeconomy as the Reinhart–Rogoff book “This Time is Different” would have us think.

Q: You would clearly like to see the EU Stability and Growth Pact reworked.

A: It’s not my place to say, but the previous version was calibrated on the basis of 1980s data, which are now fundamentally different. From a technical point of view, there are essential differences in rates having to do with long-term structural elements of the world economy that I mentioned before. I think these should be taken into account before binding ourselves politically to a particular number.

Q: You recently said that you might even look for a linker syndication this year. Given the recent move in inflation, is this something you are even more inclined to explore?

A: No, not really. Break-evens need to increase a lot more. The increases in break-evens seen to date don’t imply important improvements in inflation, and here the situation in the US is radically different from the situation in Europe. So what we’ve seen throughout this year hasn’t convinced me that break-evens are likely to increase. If I issue a linker, it’s a bet that inflation will be lower than expected. But all of that goes into the price. I think the market doesn’t expect higher inflation in Europe in the next year or two. And if I issue a linker, it’ll be very, very expensive, which will make it very difficult for inflation to be lower than what’s priced in. So it’s not the ideal moment to launch a new reference in the long end, to do a syndication. For liquidity purposes, given I’m committed to liquidity in this market, I could issue by auction a new reference in the short end. But the break-even curve, which is the inflation that’s priced in, is not high enough for me to do a 10-year or 15-year or 30-year. Maybe next year, as and when monetary policy succeeds, which I have no doubt it will. I don’t have funding needs that would justify an additional syndication.

Q: What would your overarching message to potential or actual investors be?

A: We have a great opportunity now. We have the means to grow and to invest, which is the European programme rather than through austerity, and to grow out of this crisis, not by spending less but by investing more. We have the willingness to grow. Spanish politics doesn’t agree on a lot, but if there is one thing we all agree on – right and left -- it’s the green transition and the European issue. Right and left both agree that the green transition is necessary. So 40% of our programme is green and we’re very happy with that. And the European issue; Spain is very, very pro-European. Unlike other countries, we are very happy to be European, because we think that if something comes from Europe, it’s better for Spain. We were not a founding member of the EU, but we’re a very proud member. We like to feel that Europe is helping us. So now we have the means to grow the willingness to grow and, with Next Generation EU and Spain’s Recovery, Transformation and Resiliency Programme, we have a multi-year plan that we can execute. The next few years are not going to be a problem for debt sustainability, because the interest burden is falling. This is a wonderful opportunity for us.