The fallacy of investors (including private individuals) for Treasury bills

The fallacy of investors (including private individuals) for Treasury bills

2023-08-16 17:23:51

Barcelona is considered an active haven for investors. But at a time when banks are paying little for savers’ deposits and inflation is high, a real craze has been unleashed to buy Treasury bills. This phenomenon has led to the fact that the profitability of these titles slows down in the auctions, since the State, if there is a lot of demand, does not have to reward investors as much. If demand was low, then the rate would rise. However, benchmark rates far exceed those of previous years, when ECB benchmark rates were zero or negative and the Treasury could finance itself cost-free.

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The example is in the auction this Wednesday, the last of the month of August. The Public Treasury has placed 2,048 million euros in three- and nine-month bills. An amount that exceeds the expected average range. This has made it possible to cut the remuneration of the titles to nine months, although the supply of three-month bills has increased, albeit slightly, according to data from the Bank of Spain. And the demand from investors has once again greatly exceeded the amount placed on the markets: in this Wednesday’s auction, requests exceeded 5.35 billion euros, more than double the amount awarded.

The fact is that Treasury bills have become an object of desire for investors, not only institutional ones, but even individuals. It is estimated that 20% of the investment in the last auctions has been from individuals, to the point that at some point queues have been seen in front of the Bank of Spain offices. In addition, the Ministry of Economy is considering hiring a private company to set up one call center to attend to investor inquiries. In fact, as he explained The newspaperthe company chosen could be Cibernos Consulting, which would have presented the most competitive offer, of 3.87 million for one year, extendable for another year, which would mean a total cost of 7.75 million.

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Anti-inflation asset

In this Wednesday’s auction, 523 million euros were placed in three-month bills, against a demand of more than 1,889 million euros, and the marginal interest offered was in the 3.535%, slightly above the 3.531% of the previous auction, the highest percentage since November 2011. In the nine-month bills the Treasury has awarded almost 1,525 million euros, below the 3,462 million requested by the investors, at a marginal return of 3.700%, lower than the 3.810% offered in the pre-issue last July 11, when the highest return on these securities was achieved since 2013.

In both cases, interest rates that far exceed current Spanish inflation, of 2.3% in July, and much higher than the profitability that most banks offer for their deposits. Two factors make it an attractive investment for more conservative investors, who are looking for asset safety.

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