There were celebrations at the Spanish treasury last month. Two days after secretary of state for the economy José Folgado presented Spain's debt issuance plans for 2002 to investors in Madrid, Moody's upgraded it.
The two-notch upgrade, from Aa2 to Aaa, proved that patience is a virtue, says Carlos San Basilio Pardo deputy director general for public debt, at the economy ministry's treasury. "We've been arguing with Moody's and Standard&Poor's for a few years about the fact that we thought we should be upgraded," he says. "The fundamentals of the Spanish economy are in good shape and we compare well to other Aaa rated issuers."
Moody's rating action, which covers euro and foreign denominated government bonds, brings Spain into line with the rest of the eurozone countries, with the exception of Italy, which is still Aa3 rated. The timing is particularly fortuitous as one of Spain's targets this year is to increase the percentage of debt issued as long-dated bonds. Out of a forecast total requirement of e64 billion ($57 billion), treasury ministers plan to issue e6.5 billion this year with 15- or 30-year maturities.
Until now, Spain has suffered for its lower rating because investors tend to buy German or French bonds when investing for euro-denominated government bonds.