The Public Treasury is preparing an auction, to be held this Tuesday, February 7, for six- and twelve-month bills at a time when individual investors are showing great interest in buying this type of debt given its high profitability. The physical queues at the Bank of Spain are a good example of the investor appetite for these products.
The marginal profitability at this time of these letters to six and twelve months is close to 3%. Specifically, in the last issuance of this type, interest stood at 2.599% on six-month bills and 2.998% on one-year bills, reaching its highest levels since August 2012. Three-month bills months, for their part, currently register a return of 2.198% and those of nine months, of 2.839%.
Since Tuesday, the Bank of Spain has established a mandatory prior appointment system for the entity's Direct Accounts service. The organization directed by Pablo Hernández de Cos thus intends to avoid the waiting of private investors during the last days at the headquarters.
The purchase of debt can also be carried out, however, through the Treasury website in the "securities purchase and sale service" option, as well as in financial institutions (banks or savings banks) and in securities companies and agencies.
“Small savers are not economists, but they usually know where they should put their money. Given the low profitability offered by banks, the inflation that literally eats up the value of their savings and the guarantee offered by the public debt, the demand for Treasury bills has skyrocketed”, explained the professor of the Degree in Administration and Management of VIU companies Tomás Gómez in statements to Europa Press.
The Treasury will return to the markets on Tuesday, after placing 6,499.35 million euros in the first auction in February, remunerating investors in the four references issued at the highest rates. In fact, profitability managed to exceed 3.5% in 20-year State bonds.
All of this in a context marked by the successive rises in interest rates by both the Fed and the European Central Bank. In fact, the last decision adopted by the Governing Council of the European Central Bank (ECB) this week was to raise rates by 50 basis points, so that the interest rate for its refinancing operations will stand at 3%, while the deposit rate will reach 2.50% and the loan facility rate will reach 3.25%.
For its part, the Federal Open Market Committee (FOMC) of the United States Federal Reserve (Fed) also decided this week to approve a rise in the country's interest rates of 25 basis points, to place them in a target range of between 4.50% and 4.75%, as reported this Wednesday.
In the bond market, the rise in interest rates makes the bond cheaper and attracts capital. An important part of international capital movements is due to this factor, which has "effects on the currency exchange rate," Gómez explained.
According to the Government in the general State budget (PGE) of 2023, the gross issuance by the Public Treasury will be 256,930 million euros this year, which represents an increase of 8.2% compared to the estimate for 2022, due to the rise in interest rates.
For its part, the net indebtedness of the Public Treasury in 2023 will remain at 70,000 million. Breaking down by type of instrument, the Treasury Bills are expected to provide net negative financing of 5,000 million, so the State bonds and obligations, together with the rest of the debts in euros and foreign currency, will contribute the remaining 75,000 million.
