The imminent rise in interest rates by the European Central Bank has not caught the Spanish government off guard, which over the last year has developed a strategy to shield public debt as much as possible from the new trend in the markets. This was explained this Tuesday by the First Vice President and Minister of Economic Affairs, Nadia Calviño, during the press conference after the Council of Ministers in which she appeared to present the Treasury Report before it was sent to the Cortes.
The Government has taken advantage of the fact that during 2021 the Treasury has paid the lowest interest rate in history for its issues, an average of 1.64%, and has even tasted the honey of negative rates to try to extend the terms of maturities. “Thanks to the good management of the Treasury, we have increased the average life of the debt to over eight years, the longest term in history, and currently only 15% of the total public debt needs to be financed, so only that amount is exposed to market rate hikes,” explained Calviño.
During the past year, according to the data reflected in the Report, the Treasury completed a net financing of 75,000 million euros, 25,000 less than expected at the beginning of the year and 30,000 less than what was issued in the complicated year of the outbreak of the pandemic. In gross terms, emissions reached 264,000 million euros
The vice president tried to distance herself from the concern generated in the market by the rise in the risk premium that she described as "moderate" compared to previous stages and assured that the appetite of investors for Spanish debt continues. She is not wrong. This Tuesday the Treasury launched a debt issue in which it intended to raise around 5,000 million and received a demand of close to 10,000 million. But it is also true that in issuing 6-month bills it had to say goodbye to the negative interest rates of recent months and pay rates of 0.134%. The interest of the letters to 12 months also rose, up to 0.702%
This change in trend is what will spoil the average paid during the first six months of 2022, 1.59%, even lower than the average for 2021. Government estimates forecast that the debt interest burden will amount to 30,000 millions of euros. In his intervention, Calviño insisted again that the Government will comply with its fiscal commitments to reduce the deficit to 2.9% in 2025 and the public debt to 110%.
