Treasury receives twice as many requests to buy bonds compared to issuance amid interest from small savers in light of low bank deposit profitability
The rise in interest rates – today the ECB is announcing a new hike – has prompted small investors to look to sovereign debt as an alternative to earn returns. Savers follow in the wake of the big funds betting on Treasury issues, like this Thursday. The agency just placed 6,499 million euros in the first auction in February. In this case it concerned Bonds and Bonds for which the question was asked at almost 13,700 million, which is more than twice what the State has issued. And he did that without any problems.
The secret of the success of the state auctions is explained by the interests that the Treasury offers to this type of investment, one of the safest when dealing with government debt. In concrete terms, it has placed 2,400 million euros worth of 3-year government bonds with an interest rate of almost 3%, compared to 2.8% at the previous auction.
In five-year government bonds, the Treasury has placed 1,611 million, with a yield of 2.9%, well above the pyrrhic 0.036% of the previous auction, held in 2022, when interest rates were still very low.
The Treasury has placed 505 million in inflation-indexed government bonds with a remaining term to maturity of 7 years, with an interest rate of 0.886%, compared to the previous 0.601%. Finally, in 20-year government bonds with a coupon of 3.45%, it sold EUR 1,982 million at an interest rate of 3.6%.
Compared to all these references, bank deposits barely offer a current average interest rate of 0.6%. And this despite the latest interest rate hikes in the eurozone. Small savers have realized that in the national debt they can find a balm for their capital, which stagnates when checking accounts and bank deposits, the remuneration of which is minimal and does not seem to grow much for the time being.
At a time when private investors are showing strong interest in Treasury bills, the agency will auction short-term debt, such as 6- and 12-month bills, next Tuesday, February 7. It should be remembered that from that same day it will be necessary to request an appointment for the Direct Accounts service of the Bank of Spain, after the long queues observed today at the headquarters of the organization for the purchase of state accounts given their high profitability.
The purchase of debts can also be carried out via the website of the Treasury under the option “Security purchase and sale service”, as well as from financial institutions (banks or savings banks) and from securities companies and agencies.
According to the 2023 General Budget, the gross issuance by the Treasury will amount to EUR 256,930 million this year, an increase of 8.2% compared to the estimate for 2022, due to the increase in interest rates.
For its part, the net debt of the Treasury will remain at 70,000 million in 2023. Broken down by type of instrument, the Treasury Bills are expected to provide net negative funding of 5,000 million, so government bonds and liabilities, along with the rest of the euro and foreign currency debt, will contribute the remaining 75,000 million.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
