Exclusive: Spanish Debt Head Díaz: Would Consider New Green Bonds Once 2021 Bond Nears €20 Billion

2 October 2024

Exclusive: Spanish Debt Head Díaz: Would Consider New Green Bonds Once 2021 Bond Nears €20 Billion
- Díaz: Latest syndication had highest demand for inflation-linked bond in euro area
- Díaz: Comfortable with portfolio average life
- Díaz: Won’t adjust issuance programme to short-term changes in interest rates
- Díaz: We try to be very predictable; issuance strategy not opportunistic,
- Díaz: Bond buybacks not part of our regular toolkit

By Marta Vilar – MADRID (Econostream) – Spain would consider issuing new green bonds once the size of its current 2021 bond approaches at least €20 billion, according to Carla Díaz Álvarez de Toledo, director general of the Spanish Treasury.

In an interview with Econostream on Thursday (transcript here), Díaz said that Spain’s first green bond was being reopened regularly at a pace of €3.5 billion a year and that its current size was €13.5 billion.

‘[I]t still has room to reach the benchmark size of Spanish government bonds of at least €20 billion. Once we approach that size, we would consider issuing new bonds to regularly build a curve with sufficient liquidity’, she said.

Regarding the Treasury’s latest syndication on September 24, Díaz said they were ‘very pleased’ with the outcome of the transaction, in which a new 12-year inflation-linked bond was issued.

‘The timing was very favourable, as illustrated by an order book exceeding €50 billion, the highest demand for an inflation-linked bond in the euro area’, Díaz explained.

Spain had already done four syndications in 2024, as usual, and auctions for the remainder of the year would be ‘relatively small, because we are very close to completing the programme’, she said.

Regarding the average life of the Treasury’s portfolio, which has been close to eight years lately, Díaz expressed satisfaction with that achievement.

‘[W]e consider it to be a fairly successful risk management strategy that has allowed us to smooth out interest rate variations. Going forward, we are comfortable with this level’, she said.

Asked about the possibility of not reaching this year’s net issuance target, as happened last year, Díaz said the Treasury was ‘comfortable at the current level for the time being’.

Despite the ECB’s easing cycle, Spain would not ‘adjust the programme to short-term changes in the interest rate environment’, according to Díaz.

‘We try not to make our issuance strategy opportunistic, and we tend to maintain a very predictable pattern with four syndications and two new 10-year bonds every year, and then we alternate issuing a 15-year and a 30-year bond’, she noted.

As for the potential for bond buybacks, Díaz said that despite the Treasury having smoothed its issuance pattern, ‘given that the volume of redemptions is quite similar to this year's, we already have stability in the pace of issuance. Repurchases are not part of the Treasury’s regular toolkit’.

At the time of the interview, the French risk premium had surpassed the Spanish spread with the German Bund, which was at around 79bp. Asked about it, Díaz said they were seeing a ‘structural trend towards a reduction in the risk premium’ that was not interrupted by periods of market volatility.