The interest of individuals in public debt surprises the Treasury and the Bank of Spain

  • The Treasury website stops being operational for a few hours to make purchases and the supervisor registers queues at its headquarters

The growing interest of individuals by public debt given the negligible profitability offered by the Bank deposits despite the rise in official interest rates is surprising this week to Public treasure and to Bank of Spain. These are two of the institutions through which titles can be acquired —in the Web or in person, respectively— in new State issues. The other, more expensive for the higher commissions, is to place an order through a bank, agency or brokerage firm.

The securities purchase service of the Treasury website has been this thursday inoperative for a few hours, while in the headquarters of the Bank of Spain have been registered queues in the last days. In the last auctions of lettersinterest has reached close to 3% to nine months and savers want to take advantage of it. Faced with this profitability, the new deposits banks had an average interest of 0.7% in November, latest data available. The next February 7th there is a new issue of titles at six and 12 months, while the February 14th there will be a placement of securities at three and nine months.

Treasury sources explain that it has been decided to leave the securities purchase website inoperative for a few hours before the high volume of operations registered in the last days. It has been necessary, they add, to guarantee the correct sending the information to the Bank of Spain, which is the one that has to certify the data. However, they clarify, no one has been harmed, since the deadline to place orders for the auctions this Thursday (bonds and debentures) and next week (bills) ended this Tuesday.

Queues in the street

The queues at the Bank of Spain, for its part, have occurred after it announced last Friday that starting next February 7on Tuesday of next week, it will be necessary to have requested appointment (in its Web or by phone 913 385 000) to go in person (Monday to Friday from 8:30 a.m. to 2:00 p.m.) at the service of direct accounts of the organization, both at its headquarters in Madrid as in their territorial branches. Direct accounts are securities accounts opened at the Bank of Spain to hold the balances of State debt purchased by their holders in the primary market (direct Treasury issues).

The opening of a direct account occurs as a result of the direct purchase of state debt in the Bank of Spain or through the page Treasury website; the balance transfer of securities from a participating entity in the Spanish public debt markets (such as a bank or savings bank) to the Bank of Spain; or the transfer of a direct account of a deceased to his heirs.

These accounts allow you to exercise the economic rights derived from the acquired debt (interest chargeredemptions or exchanges, through a wire transfer), as well as the reinvestment of the amortized debt, as long as the amortization coincides with the day of new debt issuances (the bill issuance calendar is drawn up in such a way that all issuances are linked to an amortization). They also allow transfer the titles of debt before maturity other entity authorized. On the other hand, they do not allow you to operate in the Secondary market (purchase and sale of public debt between private investors).

renewed interest

The public debt of the State is attractive again as an investment for Spanish households by first time since 2015. So, the European Central Bank (ECB) began to purchase sovereign bonds from euro countries to avoid deflation, purchases that sank for years the interest paid for those values. Now, instead, the hardening accelerated from the monetary politics to combat the inflationary spiral is raising profitability Treasury bills, bonds and obligations. And the families are acting accordingly: the data indicates that in 2022 they increased their investment in public debt for the first time in eight years.

According to the latest figures from the Bank of Spain, individuals closed November with 2,232 million euros invested in Treasury securities (950 million in letters in the short term and 1,282 million in bonds and debentures longer expiration). The figure is 1,222 million and 120% higher than that of a year before and 869 million and a 63% higher than in October. Given the trend throughout the year, it is foreseeable that the difference would increase in December and that 2022 would effectively end with the first annual increase in the household public debt portfolio since 2015. In fact, only in this Januarythe Treasury sold 400 million of debt through his Webmore than in all of 2022.

The ECB rate hike —2.5 points since July, up to 2.5%— has been transferred to interest on public debt and explains its greater appeal to households. Thus, the average guy of outstanding debt stood at the end of last year in the 1,727%from 1.636% a year earlier, in what was its first rise since 2011. More representative to understand the renewed interest of households are the rates of the new issues of debt. Two examples: the one for bills at six months went from -0.69% in those auctioned in December 2021 (the State returned to the investor less money than it had lent) to the 2.09% in Decemberwhile that of 10-year bonds shot up from 0.39% to 2.9%.

unprofitable deposits

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Another factor that explains the growing interest of families is the very low profitability offered by the deposits by banks despite the ECB rate hike. Thus, the average guy of new deposits in November was 0.7% and the balance is still in a negligible 0.16%. Entities are taking advantage of the ample liquidity position who gave them the ECB injections of recent years to not increase pay of liabilities and thus obtain greater profitability for its clients thanks to the increase in the cost of credits.

In front of one inflation annual average of 8.4%both public debt and deposits last year represented a loss of purchasing power for households, but lower in the case of sovereign securities. What is foreseeable is that the advantage in favor of Treasury securities will be maintained in 2023. The ECB has thus confirmed that it plans to continue raising the reference rates (the market expects increases between two and three times at the beginning of the year, up to 3.5% and 4%, the first this Thursday). And despite this, experts anticipate that the average interest of deposits don’t go much further than 2% within one to two yearsor even stay below.

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