March 25, 2023

After the bet of the president of the European Central Bank (ECB) Christine Lagarde to continue raising interest rates -with the rise of 50 basis points this Thursday- despite the financial instability marked by the collapse of SVB Financial and the subsequent crisis of the Swiss giant Credit Suisse, it is expected that the interest offered by the Public Treasury Letters will replicate the increase and improve the profitability of those who bet on investing their savings in the purchase of public debt.

Specifically, Lagarde insists on this monetary policy since 2022, the year in which she has already announced four rate hikes, with the aim of tackling inflation. These measures have consequently triggered the remuneration achieved by the Public Treasury through the purchase of debt, placing the interest on its titles at figures that have not been contemplated for a decade, finally reaching over 3%, and leaving the image of the long queues of savers interested in the Letters in front of the Bank of Spain. Specifically, it was in this month’s auction when the Letters have managed to exceed that percentage. The 12-month titles are those that have obtained the highest profitability, with up to 3.34%. They were followed by six-month bills, with 3.16%, and nine months, with 3.03%. In last place were those with a three-month maturity, which have reached a remuneration of 2.67%, compared to the 2.52% obtained in the previous month.

These percentages are what have popularized the purchase of public debt as opposed to investing in financial products such as deposits. Since, faced with a Treasury that transfers the ECB’s rate hike, there is the traditional bank that maintains timid remunerations that are barely around 2% and are not as attractive for liabilities as those offered through Treasury Bills.

The upward trend of the Letters does not seem to have an end at the moment, since Lagarde has left the door open to the increase in rates in May, so the profitability of the Letters could replicate the rise for several months. That is why those interested in remunerating their savings should consider the next auction deadlines announced by the Public Treasury. Firstly, the date for the six and 12-month bonds is scheduled for April 11, while those with a three- and nine-month term will not be auctioned until April 18. These dates give a margin of almost a month for the saver to make the decision, however, if he prefers, the terms of the coming months are also closed. For example, in the month of May, the auction of 6 and 12 month Bills will take place on the 9th, while the date of the 3 and 9 month securities is the 16th.

How to buy public debt

If they want them to obtain a return on their money, they should consider that the Letters are put on the market by auction, and, from March, the fixed prior deposit will be 100% of the nominal amount urgently. The minimum amount for the purchase is 1,000 euros and, if the investment is greater, the figure must be a multiple of this number. In addition, to operate directly, there are two ways. First of all, the user can go to a Bank of Spain office and do the processing in person, or they will also have the option of accessing it online through the Public Treasury Securities Purchase and Sale Service, which will require be the holder of an account in the Bank of Spain; If you do not have one, you must request its opening in the same purchase process.

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