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In 2016, Spain has pushed forth with the economic recovery that began in 2013 Q4, standing out as one of the
main engines of growth in the Euro Area. This solid growth path has been accompanied by the correction of the
imbalances that unleashed last decade’s economic crisis. For the first time in its recent history, Spain has completed
four consecutive years with a current account surplus while doubling the Euro Area’s real growth rate.
Economic growth in the past few years has been labour-intensive: since the end of 2013 the Spanish economy has
generated almost 1.5 million new jobs, practically one out of every three in the Euro Area. A strong recovery in
employment and the subsequent fall in registered unemployment foster private consumption and investment, while
external competitiveness and export dynamics have continued to improve. Spain’s banking system, after a huge
effort in transparency, recapitalization and balance-sheet clean-up, is now in an optimal position to fulfil its
function to transmit credit to the real economy. The Spanish economy’s deleveraging process is thus taking place
without weighing down on corporate or household confidence. The private sector has reduced its indebtedness by
almost forty percentage points of GDP since the its peak in 2010.
Regarding the public sector’s weight in the Spanish economy, in 2016 the focus has been on budget consolidation,
a complex task under low inflation rates. Since late 2014 public sector indebtedness has fallen. It is important to
maintain this consolidation effort over the coming years in order to achieve total deleveraging –both private and
public – in a way that reinforces the sustainability of the Spanish economy.
The international stage has seen the US economy’s decoupling from other large economic blocs such as Asia, Latin
America and Europe, as well as significant political shifts in the UK and the USA. Geopolitics has become central to
the world’s macroeconomic equilibria and financial markets. Europe’s recovery, albeit still moderate, has been
supported by the European System of Central Banks’ asset purchase programme. The current year, therefore,
begins with some uncertainties and risks in the international environment that could have a significant impact in
The Spanish Treasury has completed its 2016 funding programme and announces a similar programme for 2017.
The Treasury must continue to take advantage of the favourable environment to make its debt portfolio more
robust in view of the gradual increase in interest rates that will surely accompany the improvement in GDP and in
inflationary expectations. To achieve this objective, it will combine transparency, for which it is already well-known
as a benchmark issuer in Spain and Europe, with an appropriate degree of flexibility to allow it to adapt to a
changing market environment that is not exempt from volatility.
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THE SPANISH TREASURY’S FUNDING IN 2016
The Spanish Treasury has completed its 2016 funding programme achieving, for the second year in a row,
minimum issuance and funding costs. As shown in Table 1, a total of 221.364 billion euros have been issued, of
which 35.043 billion euros have provided net funding. Out of total gross issuance, 100.996 billion euros have
been issued through Letras del Tesoro and 120.368 billion euros through medium- and long-term instruments.
Table 1: The Spanish Treasury's funding in 2016
(effective terms, billion euros)
Total Net Issuance
47,717 45,000 35,043
Total Gross Issuance
236,817 226,694 221,364
Medium- and Long-term 1
Gross Issuance 2 139,000 125,301 120,368
Amortisation 95,997 84,301 85,301
Net Issuance 43,003 41,000 35,067
Letras del Tesoro
Gross Issuance 97,816 101,393 100,996
Amortisation 93,103 97,393 101,020
Net Issuance 4,713 4,000 -24
Includes debt in other currencies, Bonos and Obligaciones, assumed debts, loans and other debts.
Includes two loans signed with the European Investment Bank (EIB) for a cumulative amount of 858 million euros.
Thanks to a favourable dynamic in public revenues and a more efficient use of its cash position, the Treasury
revised its funding requirement, from 45 billion euros announced in January 2016, down to 35 billion euros. The
Kingdom of Spain has used this momentum to redeem 1 billion euros of its loan from the European Stability
Mechanism, the fourth voluntary early repayment since the loan was signed in 2012.
For the third year in a row, as shown in Chart 1, the Spanish Treasury has achieved record lows in both the cost of
new issuance (0.61%) and the average cost of the outstanding debt portfolio (2.77%).
Chart 1: Cost of Debt Outstanding and Cost at Issuance
Cost of Debt Outstanding
Cost at Issuance
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These all-time lows in issuance costs have occurred even within a multiannual strategy intended to intensify
issuance in the longest tenors of the yield curve. Average life at issuance of medium- and long-term debt has
reached 11.5 years, well above 2015’s 9.1 years and more than twice the figure attained in 2012 (Chart 2). This
issuance pattern has contributed to an extension in the average life of the outstanding debt portfolio, from 6.20
years in 2013 to 6.81 years in 2016 (Chart 3), leading to a reduction in the refinancing risk and the vulnerability of
the financial burden in the event of an increase in Euro Area interest rates.
Chart 2: Marginal Life (%) and Average Life (years)
at Issuance of Bonos and Obligaciones
Chart 3: Average Life of Debt Outstanding
2010 2011 2012 2013 2014 2015 2016
As usual, the bulk of gross funding in 2016 (89.3%, up to 197.627 billion euros) has been obtained through 47
regular auctions carried out throughout the year, 24 Letras del Tesoro auctions and 23 Bonos and Obligaciones del
Estado auctions. In the 24 auctions of Letras del Tesoro, 48 tranches have been auctioned, of which 47 have been
issued at negative rates.
Around 10.3% of the funding programme (22.879 billion euros) has been covered through syndications.
Throughout 2016 the Spanish Treasury has launched four new Obligaciones del Estado through this issuance
technique: two 10-year benchmark bonds, a 30-year benchmark and the first syndicated issuance of a 50-year
The remaining 0.4% of funding (858 million euros) corresponds to two loans signed with the European Investment
In 2016 the Spanish Treasury has reaffirmed its commitment to a wide and liquid curve of Bonos and Obligaciones
linked to Euro Area inflation, issuing 7.785 billion euros (6,5% of total medium- and long-term issuance, above the
6% registered in 2015) in 10 regular auctions. In May, a new 5-year tenor was launched for the first time through
the auction procedure. In its first three years, the programme for Bonos and Obligaciones linked to European
Inflation has reached an outstanding volume of 28.544 billion euros, gradually increasing its size up to its current
3% of total debt outstanding. The Kingdom of Spain has become a benchmark issuer in this market, along with
France, Italy or Germany.
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Table 2: Issuance in 2016
(billion euros, in effective terms)
BONOS & OBLIGACIONES
MONTH 3m 6m 9m 12m = 30yr Inflation
January 351 483 2,197 4,421 7,451 4,901 3,786 8,970 978 790 19,425 26,876
February 556 2,125 3,925 4,430 11,036 1,087 1,548 3,589 591 675 7,489 18,525
March 561 875 2,373 4,746 8,555 1,160 3,760 1,027 1,860 4,947 570 13,323 21,878
April 355 578 2,971 4,116 8,019 907 2,886 700 1,695 436 6,624 14,643
May 426 445 1,555 4,434 6,860 1,585 1,267 1,635 3,741 2,223 10,451 17,311
June 1,006 921 3,102 4,101 9,130 1,877 3,822 3,871 1,638 68 11,276 20,407
July 581 486 2,471 4,433 7,971 2,050 3,387 7,713 2,127 556 484 16,316 24,288
August 420 986 2,885 4,283 8,574 1,681 1,380 612 3,673 12,247
September 456 611 2,726 4,477 8,270 2,011 1,652 2,756 1,383 648 502 8,952 17,223
October 405 550 2,255 5,252 8,462 1,320 1,634 3,344 1,095 1,367 752 9,511 17,974
November 465 550 2,860 4,563 8,438 987 1,517 3,337 1,072 880 7,794 16,232
December 1,400 565 2,253 4,011 8,229 1,450 2,684 749 649 5,533 13,761
TOTAL 100,996 16,978 25,144 41,445 12,819 15,340 7,785 858 120,368 221,364
Percentage in 2016 medium- and long term issuance →
14% 21% 34% 11% 13% 6% 1% 100%
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THE FUNDING PROGRAMME IN 2017
The 2017 funding programme will be very similar to the one executed in 2016, with a foreseen net issuance
requirement of 35 billion euros. This net funding will be attained exclusively through medium-and long term gross
issuance of 122.904 billion euros, after meeting 87.904 billion euros of redemptions. Just as in 2016, net issuance
of Letras del Tesoro will be zero: issuance will match redemptions generated in the year. In sum, gross issuance is
expected to reach 220.017 billion euros, slightly below 2016’s figure.
Table 3: The Spanish Treasury's funding in 2017
(effective terms, billion euros)
Total Net Issuance
Total Gross Issuance
Medium- and Long-term 1
Gross Issuance 1 122,904
Amortisation 1 87,904
Net Issuance 1 35,000
Letras del Tesoro 2
Gross Issuance 97,113
Net Issuance 0
Includes debt in other currencies, Bonos and Obligaciones, assumed
debts, loans and other debts.
Redemptions of Letras, and therefore also gross issuance, will
depend on the Letras issuance strategy in 2017.
Regular issuance of Treasury securities
The Spanish Treasury will continue to launch 12-month Letras del Tesoro regularly, reopening each of them in their
3-, 6 and 9 month tranches. In order for each Letra del Tesoro to acquire a sufficient degree of liquidity early on,
standard practice is to intensify the issuance in its first and second tranches (12- and 9 months Letras) and to issue
less in the last two reopenings (6- and 3 months Letras).
Regular issuance, through ordinary auctions, will also be maintained for Bonos and Obligaciones del Estado with
fixed coupon. These auctions will typically take place the first and third Thursday every month, as per the attached
calendar. The expected amount of issuance will be within the limits announced – there will be no obligation to
reach the upper limit. On each occasion, issuance will take into consideration bidding and demand structure,
outstanding amount of the instrument and the evolution of the Kingdom of Spain’s funding needs.
In 2017 the Spanish Treasury will proceed with its programme of Bonos and Obligaciones linked to European
Inflation, possibly adding an inflation-linked bond to the first auction of the month. On these occasions, as per
established practice, two separate ranges will be announced: one for nominal Bonos and Obligaciones and
another for linked Bonos and Obligaciones.
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Non-regular issuance of Treasury securities
Although regular auctions will remain the main issuance procedure, the first tranches of Obligaciones del Estado
with tenors 10-year or longer will usually be issued through bank syndication. In these syndicated transactions, the
Kingdom of Spain’s Bonos and Obligaciones Primary Dealers sell the amount issued directly to final investors,
allowing the Spanish Treasury to issue larger volumes than in regular auctions and ensuring a more efficient
distribution of the security among a diversified investor base.
The Spanish Treasury may summon special auctions, outside of the regular calendar, to provide liquidity in certain
instruments and to improve the efficiency of the secondary market. These auctions occur exceptionally and are
reserved exclusively for the Kingdom of Spain’s Bonos and Obligaciones Primary Dealers. No volume range is set
previously, and the amount usually issued is smaller than in regular auctions.
As previously, in 2017 the Spanish Treasury will be open to issue debt through private placements, in which an
instrument is issued directly to an investor, generally in the form of Medium Term Notes issued under English law.
The Treasury will receive proposals from its Bonos and Obligaciones Primary Dealers according to previously
established guidelines. These transactions will be considered insofar as they contribute to the diversification of the
Kingdom of Spain’s investor base, to the reduction of its financial burden, and to other broad objectives of the
Spanish Treasury’s funding strategy.
SPECIAL THANKS TO PRIMARY DEALERS
The Spanish Treasury acknowledges and is grateful for the key role played by its Primary Dealers in the provision of
liquidity and in the distribution of Spanish Public Debt.
The most active Primary Dealers for Bonos and Obligaciones del Estado in 2016 have been Banco Bilbao Vizcaya
Argentaria SA, Banco Santander SA, Barclays Bank PLC, Citigroup Global Markets Limited and BNP Paribas SA.
The most active Primary Dealers for Letras del Tesoro in 2016 have been Caixabank SA, Banco Santander SA,
Banco Bilbao Vizcaya Argentaria SA, Société Générale CIB and Morgan Stanley & CO. International PLC.
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