The demand of private investors in Letras del Tesoro is losing strength as banks and insurers are multiplying their offer in products aimed at the most conservative savers. The former, especially digital entities and neobanks, have opted in recent weeks to market fixed-term deposits with returns that flirt with the itions of their most successful launches.
Thus, according to data from the Bank of Spain, for the first five months, the volume of short-term State debt held by households stood at 14,947 million euros. Although it represents a spectacular increase, if one takes into account that a year ago individuals have invested 17 million euros in Bills, a certain exhaustion is beginning to be noticed with respect to the previous month. Thus, between April and May, investment in Letters has risen to 1,741 million euros, 13% more than in April, but well below the month-on-month increases of around 3,000 million that had been recorded in previous months.
In fact, between January and February the balance doubled from 3,695 million euros to 7,613 million euros, which represented an improvement of 106%. Already in March, the investment of individuals exceeded the barrier of 10,000 million euros. Specifically, it closed at 10,847 million euros, another 3,234 million euros more, recording an improvement of 42%. Finally, in April it again experienced another acceleration to exceed 13,000 million euros, 13,204 million euros.
Competition from banks and insurance companies
This slowdown in the rate of investment in State paper has coincided with the multiplication in the rate of deposit capture by part of the banks, especially in the short term, and by digital entities and neobanks. For example, ING launched a three-month fixed-term deposit with a return of 2.50%, while MyInvestor counterattacked with a return of 2.75% for the same term. One-year offers have also proliferated, with MyInvestor also standing out, with 3% for both twelve and 18 months. For its part, the returns of EBN Banco exceed 3%, but in this case for existing customers.
But competition in Treasury Bills has not only come from banks, but also from insurance companies. Precisely, Mapfre Economics recently pointed out that the volume in the savings insurance branch had experienced a spectacular increase of 71.6% in the five months of the year, compared to rates of 5-5.5% in previous years. Also, according to data compiled by Unespa, technical provisions stood at 200,387 million at the end of June.
Precisely, Mapfre has just reissued its savings insurance, Million Life 2, with a remuneration of 2.88% per year. In addition, these products are linked to life insurance and in the event of death the beneficiary will receive the capital equivalent to the capitalized premium at the technical interest rate of 3.48%. Also, Mutua Madrileña has updated its offer, with the Plus Mutualidad III Savings Plan, with a remuneration of 2.50%, improving the initial offer by one point, which stood at 1.50%.
The profitability of the Letters, near the ceiling
Everything indicates that the profitability of the Bills is about to mark its ceiling in the next auctions, coinciding with a new rise in interest rates by the European Central Bank (ECB) scheduled for this Thursday, July 27 and which will be the last before the summer period. The body will raise interest rates to 4.25% and place the deposit facility at 3.75%, pushing up the remuneration of the State debt.
Thus, the short-term interest rate will move around 4%, with some fluctuations. It should be remembered that the profitability of the Letters moved in the last auction concentrated in July between 3.531% for the three-month debt, while at 9 and 12 months it marked 3.8%, the highest level since July 2012, in the midst of the debt crisis.
