State Debt Strips 2026: What Banks and Managers Can Do with Government Bonds

Key data

Authorized financial intermediaries operating with Spanish public debt have had since May 11, 2026 a new operational tool: the ability to segregate and reconstitute certain State Bonds and Obligations, as established by Order ECM/500/2026. This authorization expands portfolio management options for institutional investors and may have indirect effects on the liquidity and price of securities in secondary markets.

For most companies and tax advisors, this regulation does not generate direct obligations or costs. Its relevance is operational and market-based: it affects how Spanish sovereign debt securities can be structured and traded in the secondary market.

What does this regulation establish?

Order ECM/500/2026 authorizes two types of operations on certain State Bonds and Obligations:

• Segregation: Separating the principal and each of the coupons of a bond into independent securities. Each cash flow of the original bond becomes an independently tradable security.
• Reconstitution: The reverse process. Reuniting the principal and segregated coupons to reconstitute the original bond.

These operations are common in international sovereign debt markets and are globally known as strips. Their authorization by the Public Treasury seeks to expand investment and portfolio management possibilities for institutional investors.

The regulation does not imply new public debt issuance nor does it modify the tax conditions applicable to the average citizen or companies in general. Its scope is limited to the operations of the Public Treasury and authorized financial intermediaries to conduct these transactions.

Economic and operational impact

The impact of this order is fundamentally operational and market-based, not fiscal or administrative for most companies. The specific effects identified are:

• Liquidity in secondary markets: The ability to segregate and reconstitute bonds can increase the liquidity of affected securities by creating new tradable instruments from existing bonds.
• Price of securities: Greater liquidity and more investment options can influence the price formation of affected State Bonds and Obligations in the secondary market.
• Institutional portfolio management: Institutional investors gain flexibility to adjust their public debt portfolios, separating or combining cash flows according to their needs for duration, risk or return.
• No direct cost for non-financial companies: The regulation does not generate fees, registration obligations or administrative burdens for companies outside the financial sector.

For financial entities and debt managers, the authorization opens an operational path that can translate into greater efficiency in managing interest rate risk and new investment strategies in Spanish sovereign debt.

Who does it affect?

This order has direct impact on a very specific profile of financial market actors:

• Authorized financial intermediaries to operate with Spanish public debt: they are the only ones who can execute segregation and reconstitution operations.
• Institutional investors (investment funds, pension funds, insurance companies, treasury departments of large groups) managing portfolios of State Bonds and Obligations.
• Public debt managers and treasury desks of financial entities with exposure to Spanish sovereign debt.
• The Public Treasury, whose operations for managing state debt are directly affected by the authorization.

It does not directly affect:

• Non-financial companies without positions in public debt.
• Self-employed workers and SMEs without investments in State Bonds or Obligations.
• Individual citizens with public debt in their portfolio (cannot perform strips operations).

Practical example

A pension fund manager has in its portfolio a State Obligation with a 10-year maturity and annual coupons of 3%. Thanks to the authorization of Order ECM/500/2026, it can request its authorized financial intermediary to segregate that security into:

• A security representing the principal (the amount to be collected at maturity), tradable independently.
• Ten independent securities, one for each annual coupon, each with its own maturity and value.

The manager can sell the short-term coupons to investors seeking immediate cash flows and maintain the principal to cover long-term commitments. If it later decides to recover the original bond, it can acquire the coupons again in the market and request reconstitution. This flexibility, previously not authorized for these specific securities, is exactly what this order enables.

What should companies do now?

1. Verify if you are an authorized financial intermediary: Only entities with express authorization to operate with public debt can execute strips operations. If you do not have that authorization, this regulation does not generate direct obligations for you.
2. Review your portfolio of State Bonds and Obligations: If you manage institutional portfolios with Spanish sovereign debt, analyze whether the securities you have in your portfolio are among those authorized for segregation and reconstitution under Order ECM/500/2026.
3. Evaluate portfolio management opportunities: Treasury desks and fund managers should assess whether the new strips possibilities improve the efficiency of their portfolios in terms of duration, liquidity or interest rate risk management.
4. Consult with the authorized financial intermediary: If you want to operate with strips of authorized securities, the channel is the authorized financial intermediary enabled for these transactions, not the Treasury directly.
5. Monitor price impact: If you have positions in the affected State Bonds and Obligations, follow the evolution of prices and liquidity in the secondary market, as the new operations may generate movements.