The treasury bills are short-term assets issued by the State, which have been and are one of the favorite financial products of those investors with a more conservative profile as a method to take the profit out of their savings in a safe manner. This type of investors is willing to receive a lower return in exchange for a guarantee that ensures their investment. However, currently, the profitability of treasury bills has experienced a large decrease and is no longer attractive to these investors.
The treasury bills, therefore, are public debt securities issued by the State for financing, whose value is € 1,000 and are issued by auction at a term of 3, 6, 12 or 18 months.
How is the profitability of treasury bills calculated?
The profitability of treasury bills does not have the same performance as public bonds, that is, the investor does not charge coupons periodically but the securities are issued at discount. This means that at the time of purchase of the treasury bill, a price is paid below its original value and upon the expiration of the transaction, the investor receives the difference.
For example, suppose that a treasury bill has a nominal value of 1,000 euros but the investor pays 950 euros to acquire that letter. After the end of the period, the investor receives 50 euros difference, which would imply that the profitability of the treasury bill, in this case, is 5%. To this profitability of the treasury bills must be added commissions that are normally imposed by the Bank of Spain, which are set at 0.15% of the value of the investment with a minimum interval of 0.9 euros and a maximum of 200 euros.
How profitable are the treasury bills currently?
Currently, it is not the best time to invest in this type of public debt, since the profitability of treasury bills is at historic lows.
In the last auctions of treasury bills made by the State, negative interest rates have been recorded, with values between -0.4 and -0.15%.
Why do investors invest even when the profitability of the treasury bills is negative?
If we look at the profitability of treasury bills today, why are there still investors willing to finance the government to negative interests?
The reason why there are still investors willing to invest in treasury bills is that they take into account the type of inflation at a certain time to calculate whether or not they can get profitability for their money with the treasury bills.
If the inflation is below the interest rate at which the treasury bills are issued, even if it is negative, the profitability of the treasury bills will continue to be positive.
How long will the profitability of treasury bills last at this time?
This current situation, in which there are negative interest rates in the issuance of debt benefits the State since it allows it to be financed without cost.
But these rates will not last in the long term, since as soon as Europe regains economic stability prices will start to rise and inflation will moderate, which will lead the European Central Bank to raise interest rates again.
How is the profitability of the treasury bills in Spain?
In February of this same year, the profitability of 12-month treasury bills was offered with an average yield of 0%. This implies that the Spanish State has been financed for one year free of charge. There have even been seasons in which the profitability of the treasury bills has been negative, which in broad strokes would imply that it has charged for its financing.
However, given this profitability given by the negative treasury bills, the Bank of Spain wanted to protect the small investor by modifying the regulations with the objective of not allowing those yields that give the negative treasury bills to reach small savers by awarding them in said case an average price.
What are the reasons that have caused the yields of treasury revenues to fall in Spain?
There are several reasons that influence and can make the profitability of treasury bills vary over time. One reason why the profitability of treasury bills has decreased is currently the program carried out by the European Central Bank, dedicated to the purchase of debt from countries belonging to the European Union, which has caused yields to decrease because this It grants a higher level of security to the countries to which debt is purchased as in the case of Spain.
What are the alternatives to the low profitability of treasury bills?
As we have seen, the profitability of treasury bills has decreased slightly, which is bad news for those savers who do not want to take risks in their investments. However, alternatives have appeared that offer an interesting return, with a different term and with investment security. We are referring to the investment in loans https://www.purplepayday.loan/ through Crowdlending. From MytripleA we collaborate with Reciprocal Guarantee Companies that are in charge of endorsing some of the loans of the platform offering and thus guaranteeing the investors who decide to fund the loan a great profitability. On the other hand, those loans that are not guaranteed by Reciprocal Guarantee Companies are associated with a valuation rating offered by our platform that ranges from A + to F, based on this rating the investor can decide the risk that he wants to assume.