The Spanish risk premium, the additional cost that the markets demand from the country to issue debt compared to what Germany pays (whose ten-year bonds continue to be the benchmark in terms of stability and security in Europe) This Wednesday, it fell below 43 basis pointsstanding at its lowest level since 2008, just at the start of the last international financial crisis.
When the secondary debt market opens, Ten-year Spanish bond rises to 3.260%compared to the 3.278% at which it closed the previous session. Meanwhile, the German Bund was trading at 2.831%. With this new drop, the Spanish premium is well below the French premium (70 basis points), the Italian premium (65.6 basis points) or the Greek premium (60.3), although above the Portuguese premium (29.8).
The risk premium is an indicator of the solvency of a State and the confidence that investors have in the solidity of its economy, expressing the cost of financing it through the issuance of public debt compared to a reference country (in the EU, Germany). In the worst moments of the financial and debt crisis, this variable It reached almost 600 basis points. It was July 2012, after the rescue of Spanish banks and when there were fears of the bankruptcy of peripheral economies.
That same week, Treasury Secretary Paula Conthe stressed that the organization was confident in the continuation of the decline in the risk premium in the coming months and highlighted that the improvement in the rating of Spanish sovereign debt by the main agencies will allow more than half of the debt to be in the hands of foreign investors in the short term, compared to 48% currently.
Strong foreign demand
The agency reporting to the Ministry of Economy, Trade and Business maintains emissions planned for 2026 at 55 billion, the same figure as this year, despite the fact that the gross volume will increase by 4.2%. Thus, the improvement of Spain’s rating will allow a greater presence of Nordic and Asian investors, but also from the Middle East. Over the past four years, foreigners have acquired 208 billion in debt, compensating for the gradual withdrawal of the European Central Bank (ECB), which reduced its presence by 65 billion throughout this period, coinciding with rising interest rates.
The main national and international organizations have improved their growth forecasts for the country, thanks to the revival of private consumption – helped by falling interest rates – and business investment, fueled by Next Generation funds. This also led the Executive to improve its projection for this year to 2.9% in the macroeconomic table that serves as the axis for next year’s General State Budgets, still awaiting presentation to Congress.
About The Author
