First test passed. The National Treasury, which is the institution in charge of issuing Spanish public debt to the markets, continued with a more-than-successful issue of 12- and 18-month notes. It was not an easy task, because conditions are the worst they have been all year, which was reflected in the costs of the deal. The Treasury sold debt at rates not seen since December and 80% more expensive than last month.
Specifically, one-year notes were sold at an average interest rate of 2.62%, which is 85% more than the 1.41% rate that Spain locked in last month. 18-month notes sold at 3.11% or 82% more than last month. In addition to being the highest interest rates Since December, when Spain sold these notes at 4.05% and 4.23%, respectively, yields are once again competing with 12-month bank deposits whose average interest rates are 2.65%. On the flip side, promissory notes offer attractive 4% yields, but they are inherently more risky than national treasuries.
Prudence as a virtue
Alongside interest rate increases, the debt issue was characterized by the Treasury's established financing goals. Conscious of tensions that have escalated over the past several weeks, the Treasury was less ambitious than it had hoped to be, because it lowered its goal to between 2 and 3 billion euros. In March, it talked of raising between 4.5 and 5.5 billion euros. "I think the Treasury exercised sound judgment in lowering their expectations for this morning's debt issue. It's also lowered its objective for tomorrow's bond sale as well," said José Luis Martínez, a strategist for Citi in Spain.
