Spain Rules Out Selling 100-Year Bonds, Sticking to 50-Year

(Bloomberg) -- Spain has no plans yet to join the club of European nations that have sold century-long bonds, but instead will issue more 50-year debt to lock in record-low borrowing costs.

The government will tap more of its longest bond to date, which has a 2066 maturity, under an issuance strategy developed with primary market dealers, Carlos San Basilio, head of the country’s Treasury said in an interview in Madrid. Spain first sold the security in 2016.

“Our intention is to do regular issuance of 50 years, not go beyond that like the Austrians who go for 100 years,” the Treasury secretary general said.

Investors scrounging for ultra-safe securities yielding more than 1% have reached out to European sovereigns in recent years, although only a handful such as Belgium and Ireland have extended maturities to one century. Austria sold 1.25 billion euros ($1.4 billion) of 100-year debt in late June.

The Austrian deal was more than four times oversubscribed, and the security was priced to yield 1.171%.

Investors are not only interested in above-zero coupons. Tumbling yields can bring above-average returns to traders in longer-dated debt. Since the latest rally in Spanish bonds began in May, the country’s 50-year security has returned about 22%. That smashes the 4.6% return of a Bloomberg Barclays index of seven-to-10-year bonos.

Spain’s Economy Minister Nadia Calvino said Wednesday that the government would continue efforts to rein in increases in its debt. In autumn, the Treasury will see if it can further bring down its current goal of 30 billion euros ($33.6 billion) of net new borrowings, she said.

“We will see in September or October if we have margin to reduce further the net issuance of debt,” Calvino told reporters in Madrid. Spain last reduced its net issuance target in April, cutting it from the previous goal of 35 billion euros.

--With assistance from John Ainger.

To contact the reporters on this story: Charles Penty in Madrid at cpenty@bloomberg.net;Todd White in Madrid at twhite2@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, William Shaw, Anil Varma

©2019 Bloomberg L.P.