Public debt: maximum security
The profitability of Spanish public debt, a product of savings guaranteed in an absolute and constitutional way by the State, exceeds the best bank deposits on the market at the moment. Given that the guarantee of a State is, at least, the same as its strongest financial entities (whose business is concentrated in Spain), the normal thing would be a flight of savings from the banks to the State.
The only disadvantage would be less liquidity, since if you want to recover the investment ahead of time you have to sell on the secondary market, and it could trade at a lower price than the nominal one (and lose money).
After all, money in deposits is guaranteed by the Deposit Guarantee Fund up to 100,000 dollars, when the public debt is guaranteed without limit.
However, in bank and savings bank offices, investment in public debt is not recommended, not because it is not beneficial for its clients, but because it means that the money they would have on their balance sheets would go to the State. Another case that confirms that banks do not advise, but sell based on their commercial interests.
Let’s see what type of public debt exists:
The Bills are short-term debts that are issued at 3, 6, 12 and 18 months. The Bonds are medium-term debts and are issued at 3, 5 and 10 years. Above 10 years, the debt is considered to be long-term, and is called Obligations.
A solvent issuer (such as the State), good tax treatment (they are exempt from withholding), easy to acquire, directly from the Public Treasury or through the bank, and a short-term investment (maximum 18 months). This seems to be the recipe for the success of this fixed income product.
Taking into account that the latest issuances of bills of exchange are being carried out with interest rates higher than the time deposits offered, experts in financial products advise that, when compared to other similar bank products, such as bank deposits, They observe better profitability, the recommendation for all those conservative-type savers is to buy Treasury Bills.
The disadvantages? The costs and commissions involved in the purchase of the product: custody, interest collection, the sale of bills, etc.
State Bonds and Obligations
They are a somewhat more complex alternative, designed for more expert savers, although it is not required to have too high investment knowledge. Unlike Bills, Bonds and Obligations are a form of medium and long-term investment, respectively. The collection of interest is explicit, through the payment of coupons annually. They are issued through competitive auction and the liquidity is relatively good since we will be able to get rid of the asset at any time, selling it in secondary markets.
The main advantage of these products is the guarantee offered by the State, which makes it one of the safest products on the market.
A product with good profitability, which very few have taken advantage of
A few weeks ago, there was a public debt auction with very good profitability, of which only a few have taken advantage, knowing that such profitability would be paid by all of us: the issuance of public debt.