For the Euro-7 sovereign issuers under our scope + EU NGEU, we expect a substantial stabilization of both net and gross issuance in FY24 vs. FY23. However, the issuance targets, combined with the additional net supply derived from the ECB’s debt portfolio roll-off, will be conducive to a scaling up of the net recourse to capital markets to c.EUR570bn by the main four issuers (c.EUR710bn if we add the NGEU issuance) from the EUR440bn registered in FY23 (c.EUR560bn including NGEU funding).
Spain. The funding strategy contemplates a target for gross medium- and long-term bond issuance of c.EUR173bn (c.EUR168bn in FY23): this would cover bond amortisations of EUR113bn and leave net bond issuance at c.EUR60bn (c.EUR74bn in FY23). The risk of deviation in these figures is biased to the downside. As was the case in FY21-FY23, some effort to bring forward the funding programme may also be seen in FY24. We expect c.20-23% of total gross bond issuance to be covered through syndications (c.EUR35-40bn), most likely through two new 10Y references (EUR28-30bn), a new 30Y (EUR5-7bn), as well as a new 20Y (EUR4-6bn) or, alternatively a new 10Y linker.
Italy. We expect gross bond issuance this year of EUR352bn and net issuance of EUR85bn (vs. EUR361bn and EUR92bn, respectively, in FY23), with an average maturity of issued debt (in the m-l term tenors) to be around 7.8 years (excluding the NGEU loans), contributing to an extension of the average duration of the outstanding debt. We estimate the total amount of syndications at EUR90bn: besides the dual tranche of this week, we expect c.EUR12bn in the longer tenors of BTPs, c.EUR10bn of BTP 10Y, c.EUR34bn of BTP retail, and c.EUR7bn of BTP Green, EUR5bn of a new BTP€I 10Y and c.EUR2bn under the Global/EMTN programmes. In line with recent years, we expect the Italian Treasury to execute at least EUR10bn of ALM operations (given the current debt profile, buybacks will probably be focused mainly on the 2025 and 2026 maturities).
Portugal. We expect gross bond issuance to be c.EUR13.9bn (EUR9.4bn in FY23), whereas net bond issuance may reach up to EUR5.1bn (well above the negative net issuance of EUR3.3bn in FY23). Portugal has already executed a new 10Y syndicated deal and we believe that this is very likely to be continued in the longer part of the curve with the possibility it will offer a new 30Y benchmark, for a total volume to be raised through these operations of c.EUR7bn. We expect the bond exchanges and buy-back operations to continue in FY24 in order to smooth out Portugal’s redemption clustering in 2025, 2027 and 2030, however for a lower amount (c.EUR3bn) than the record high in FY23 (c.EUR5.3bn).