Portugal is the OECD country most dependent on the central bank for public debt


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More than 50% of the national public debt is in the hands of the ECB. This is twice the average of the 38 OECD countries. No other country has such a large dependency.

Among the 38 countries in the Organization for Economic Cooperation and Development (OECD), Portugal is the country most dependent on its central bank to manage its public debt.

According to the latest data from the Treasury and Public Debt Management Agency – IGCP, 52% of national public debt securities are in the hands of the Bank of Portugal and the European Central Bank (ECB). This is twice the average portion among OECD countries, according to the report “OECD Sovereign Borrowing Outlook 2023”, published this Monday.

However, Portugal anticipates that this percentage may decline as the ECB further deleverages its balance sheet through the quantitative tightening process it has underway, according to the OECD report .

For Portugal, this dynamic may mean increased pressure on its debt management, since a large part of the securities currently held by the ECB and the Bank of Portugal will have to pass into other hands, namely into the portfolios of foreign investors.

Recall, for example, that in 2015, when the ECB held about 13% of government debt securities, 43% of the total volume was in the hands of resident investors and 44% of securities were held by foreign investors. Today, the share of foreign investors is only 25%, the lowest since at least 2012. The same dynamics is happening with resident investors.

According to the latest IGCP data, in January, only 23% of national debt securities were held by investors residing in Portugal – about half the percentage recorded in December 2013.

However, the weight of domestic investors has increased during the first quarter, as a result of the rush to Saving Certificates by households. Between January and March, households invested more than 9 billion euros of their savings in Saving Certificates, about 60 times more than the 150 million euros registered in the first quarter of 2022.

In the OECD report, a government source reveals that in the last nine months to October 2022, IGCP noted an increase in demand for public debt securities by domestic investors and a decrease by foreign investors. The OECD notes, for example, that in 2022, the size of orders on public debt books decreased by about half compared to 2021, with the “IGCP seeing a drop in large syndication orders, mostly from real money accounts and hedge funds.”

Also relevant in the management of the public debt is the reduction in the amortization schedule of the debt issued in the last year. According to the OECD, the average maturity of medium and long-term debt issued in 2021 was 14.2 years and in 2022 it dropped to 12.3 years. This year, until March, the maturity of new issues is 17.3 years, according to data from the IGCP, and the cost of debt issued has been set at 3.5% – more than double the price recorded in 2022.

In the survey accompanying the OECD report, which was completed by October last year, the government noted that it “was not [planning] to review the long-term financing strategy in terms of maturities or debt instruments due to current financing conditions.”

However, already this month, the Minister of Finance, in an order published in the Diário da República, announced a reduction of 9.5 billion euros in the ceiling for issues of bonds and Treasury Bills, as a result of the rush for Savings Certificates by households in the first quarter.

The OECD report also reveals that IGCP has observed a growing interest by investors in green bonds. “This is mostly perceptible in roadshows and one-on-one meetings,” says a government source in the same report.

Despite this interest – and the fact that the Portuguese government has even included in the State Budget elements referring to public financing using sustainable emissions – Portugal has not yet issued any sustainable sovereign bonds. Besides Portugal, the OECD notes that Norway is also in this situation.

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