The Spanish Public Treasury successfully conducted an auction on Tuesday, May 6, 2025, placing a total of 5,767.57 million euros in letras, marking the start of the May auctions. This auction saw a reduction in the profitability offered to investors for both six-month and twelve-month letras, reaching minimum levels not seen since 2022. The demand for both issues exceeded 10,335 million euros, indicating strong investor interest despite the declining yield.
In the case of the six-month letras, 1,692.28 million euros were placed against a demand of 4,101.56 million euros, resulting in a marginal interest rate of 1.954%. This is the lowest level since October 2022 and is down from the 2.119% offered in the previous auction. Meanwhile, for the twelve-month letras, 4,075.29 million euros were awarded, also below the requests exceeding 6,233.53 million euros. The marginal return decreased from the previous 2.023% to the current 1.900%, marking the lowest level since September 2022.
The Public Treasury has planned another auction on Thursday, May 8, 2025, aiming to raise between 5,750 million and 7,250 million euros in bonds and obligations of the State. This upcoming auction will feature State bonds with various terms, offering coupons ranging from 1.00% to 4.00%. The marginal reference interest rates for this auction will range between 2.301% and 3.693%, depending on the term and type of financial instrument.
For 2025, the Spanish Public Treasury has projected new financing needs close to 60,000 million euros, representing an increase of 5,000 million compared to the previous year. This increase is largely due to the urgency of addressing the reconstruction and support for areas affected by the DANA disaster. In gross terms, total emissions are expected to reach 278,000 million euros, a 7.4% increase over 2024, driven by the rise in the volume of amortizations and net emissions.
The Public Treasury aims to maintain an average life of debt in circulation around 8 years, a historical maximum reached in 2021. This long average life has helped mitigate the impact of rising interest rates in recent years, with an increase of 57 basis points in the average cost of debt since its historical low in 2021, contrasting with the accumulated rise of 350 basis points in official rates during the same period.
Additionally, the Treasury plans to continue diversifying its investor base and will focus on issuing green bonds as an integral part of its financing program. This strategy will contribute to strengthening the sustainable finance market in Spain. Specifically, the Treasury intends to reopen the green bond issued in 2021 to align its volume with other references on the Treasury curve in the coming years, which will facilitate continued financing for ecological transition projects.
The recent auction results reflect a significant moment for the Spanish economy, as the Public Treasury successfully navigates market conditions that have seen interest rates fluctuate. Investors' strong demand for Spanish debt indicates confidence in the country’s fiscal management and economic stability.
As the Treasury prepares for future auctions, the focus will remain on balancing investor interest with the need for sustainable financing solutions. The upcoming auction on May 8 is set to draw considerable attention, as it will provide insight into how investors are responding to the changing economic landscape.
In summary, the Spanish Public Treasury's recent auction demonstrates a strategic approach to managing national debt while addressing pressing financial needs. The decline in interest rates for letras and the anticipated future auctions reflect a proactive stance in ensuring that Spain remains an attractive destination for investors.
