Foreign Currency Debt
Since the beginning of the 80s the Kingdom of Spain has been an active player of the international capital markets, allowing the diversification of the sources of financeand risk distribution, and promoting the Kingdom of Spain presence in the markets, where the Spanish Treasury is considered a solvent and prestigious sovereign borrower.
At present, the Kingdom´s foreign funding plays a complementary role to domestic funding in euros. Apart from the possibility of achieving attractive funding levels through arbitrage opportunities, one of the main objectives is maintaining the relationship with the global investor base that buys Kingdom of Spain Bonds but is still not a regular player in the Spanish Government Debt market.
The weight of the foreign currency denominated Debt with respect to the total Debt is a 3-4%. Besides, there is a stock of international debt denominated in euro and euro-legacy currencies (Deutsche Mark and French Franc); it is made up mainly of Deutsche Mark and French Franc denominated Eurobonds, issued under euromarket standards. This debt, originally denominated in foreign currency, has become, from January 1999, domestic-currency debt, the trading and settlement of which, however, continues to conform to euromarket practices. Its weight in the total debt stock is around 6%; this weight will be diminishing as the outstanding Issues are maturing because most of the Treasury financing in euros will be effected in the Spanish Government Debt market.
As regards strictly foreign-currency debt (before swaps), yen is clearly the predominant currency, followed by Dollar, British Pound and Swiss Franc.By instruments, negotiable debt -eurobonds and medium-term notes- is predominant, loans being less relevant. There are also a number of liquidity back-up instruments, mainly commercial paper and a multicurrency credit line.