Spain aims to sell far less debt in 2011 than it did in 2010, keeping a lid on new issuance as it looks to balance deficit-reduction goals and a market seeking high returns to invest in peripheral euro zone economies.
The Economy Ministry said on Wednesday the Treasury would issue net medium- and long-term debt for 47.2 billion euros ($62.0 billion) next year -- down from 62.1 billion in 2010 and a figure one analyst described as unexpectedly modest.
This seems a little low. We expect next year's deficit to be 7.5 percent of gross domestic product, above their target of 6 percent, and so the issuance is likely to be bigger than they expect, Giada Giani, an economist at Citi, said.
Net short-term debt planned for 2011 was zero, because new and maturing debt should balance out, the ministry said.
Spain's Socialist government has passed spending cuts worth over 50 billion euros this year as well as a slew of structural reforms as it seeks to rein in the fiscal deficit and persuade investors it will not be forced to follow Greece and Ireland in applying for financial aid.
Austerity measures, put in place by the government in the middle of the year to consolidate public finances, have meant financing necessities are less than in 2010, the ministry said.
Portugal, under even more intense debt pressure than its Iberian neighbor, also scaled back its issuance plans for 2011, scheduling gross treasury bonds for 18-20 billion euros compared with this year's 22 billion.
Economists are concerned that fiscal pressure from Spain's banking sector -- battered by a collapsed housing industry, unemployment that is more than double the European average and a stagnant economy -- will make future financing unsustainable.
The spread between Spain's 10-year bono and the equivalent German Bund stood at around 247 basis points on Wednesday, off a euro life-time high of over 310 bps reached at the beginning of December but much higher than the 67 registered in April.
Gross issuance of medium- and long-term for 2011 will inch down to 93.8 billion euros from 94.5 billion euros a year earlier.
Total debt in circulation by year-end would be around 540.8 billion euros or around 54 percent of GDP, the ministry said, slightly less than the 553 billion euros expected.
Treasury Secretary Carlos Ocana said last week he expected the debt-to-GDP ratio to come in below an original target of 62.8 percent.
The ministry also said it will begin publishing its debt auction plans on a monthly rather than quarterly basis in accordance with market preferences.
(Reporting by Martin Roberts; Writing by Paul Day; Editing by John Stonestreet)