Web Tails and Crashes: Why Does Everyone Want to Buy Treasury Bills?

Neither bitcoin nor houses in the center nor parking spaces.

Thomas Osborne
Thomas Osborne
02 February 2023 Thursday 10:39
34 Reads
Web Tails and Crashes: Why Does Everyone Want to Buy Treasury Bills?

Neither bitcoin nor houses in the center nor parking spaces. State bills have become the star product for thousands of people, who have collapsed the Treasury website and who every morning, at around 7:30 a.m., queue at the Bank of Spain to acquire public debt.

The first cause of this particular fever for Treasury bills is found in the savings accumulated by individuals. While the State goes into debt, families are breaking records of the opposite three years after the pandemic. The Bank of Spain calculates that for the first time in history, Spanish households have saved more than a trillion euros as a whole. At the end of December, deposits exceeded this figure, after increasing 4.5% in one year.

Until now, all these savers did not have many options where to put their money after more than two years of negative interest rates, but the rise in interest rates is now a promise of profitability for them. The ECB has just raised rates to 3% and has announced that it will continue raising them.

The problem is that the banks continue without rewarding savings and it does not seem that they are going to do so in the short term. Interest on bank deposits for less than two years in Spain are below 0.7%, according to data from the Bank of Spain, when the average for the euro zone exceeds 1.2%. Spanish banks do not seem to be in a hurry to offer returns because they still have a lot of liquidity. The CEO of BBVA, Onur Genç, said yesterday that "it is not on the table" to reward deposits and the president of Santander, Ana Botín, limited herself to saying today that "at some point" it will be done.

Meanwhile, Treasury bills and government bonds rent. The first issue of bills this year was made at interest rates of more than 3% and is part of a debt program that this year will be around 70,000 million euros. Every time the Treasury goes to the market to place a product, it finds a strong demand among institutional investors, and individuals are not far behind.

The Secretary General of the Treasury, Carlos Cuerpo, recently encouraged individuals to buy State debt, since it is "safe and profitable." The Government has decided to concentrate more than two thirds of the debt issues planned for 2023 in the first part of the year, in view of the strong demand and that the ECB will continue to raise rates.

Meanwhile, there is a consensus among investors that, due to market volatility and interest rate rises, the time has come to flee equities like the stock market and bet on fixed income, in which government bonds and Treasury bills are the star product.

This mix of factors has not gone unnoticed by hundreds of people, many of them retirees, who queue up at the Bank of Spain early in the morning to be given a turn with which to go through the window and buy bills for an amount greater than 1,000 euros. Acquisitions must be made in multiples of 1,000 euros.

The phenomenon has forced the institution to establish a prior appointment mechanism that will be launched as of next Tuesday, February 7. With this new system, the queues in which many individual investors have to return empty every day because they can't get their turn will end. The queues have been striking in Madrid, but the Bank of Spain has fifteen branches in Spain where you can buy bills, including those in Barcelona, ​​Valencia, Malaga or Bilbao.

Treasury bills can also be purchased at bank branches, where a commission applies. Its difference with the rest of the State bonds is that they are short-term, with maturities of just 18 months, at which time the full nominal value is returned. The Treasury issues bills for between three and 18 months.

The option to buy it on the Treasury website, which has collapsed today, is simple and can be done by following the steps indicated as long as you have a PIN or digital certificate.

As with any capital gains, they are also subject to tax, which is 19% for profits associated with investments of less than 6,000 euros and can reach 21% if the figure exceeds 50,000 euros.