At the beginning of the month of March there are two key dates that those interested in getting Treasury Bills must have crossed out on their calendar. These are March 5 and 12. On two days, the auction of 6 and 12 month Treasury Bills will take place first and then at 3 and 9 months. Households and private non-profit institutions serving households (Isflsh) consolidated themselves in 2023 as the largest holders of Treasury bills, closing the year with 24,428 million euros.
According to the latest data published by the Bank of Spain, the high profitability of short-term securities has had a very significant effect on the distribution of Treasury bill holdings, where households and non-financial institutions have become for the first time time. in 2023 in the largest holders of this type of debt.
The returns have been the main attraction of this product, which, as a general rule, has offered higher returns compared to other investments. In the last Public Treasury auctions held in 2023, interest began to be cut in all terms, except for three months, which stood at 3.6%, marking maximums since November 2011, due to the expectation that the ECB starting cuts this spring at the latest.
For 2024, the Treasury has forecast net financing needs of 55 billion euros, which is ten billion less than in 2023, when it was 65 billion euros. The estimated gross issuance will amount to 257,572 million euros, 2% more than in 2023.
What are Treasury Bills?
Treasury Bills are short-term fixed income securities issued by the Public Treasury. These are debt securities for 3, 6, 9 and 12 months with very little risk of the Government taking to the market to obtain financing. Each of these Letters has a nominal import of 1,000 euros and this would be the minimum investment amount, although it can be increased by investing multiples. As it is a fixed income, profitability is guaranteed and therefore the buyer has the profits that he will obtain at the expiration of the insured term.
How to buy Treasury Bills
The Treasury auctions Bills every month, in separate sessions for terms of 6 and 12 months, on the one hand, and 3 and 9 months, on the other. To buy them, the first step to follow is to access the Public Treasury website and open a ‘Direct Account’ at the Bank of Spain. If you have an electronic DNI or digital certificate, the client can make the purchase directly through the internet, selecting the security they want to purchase in the ‘Purchase and Sale of Securities’ section and transferring the import. Another option is to go in person to a Bank of Spain branch with an appointment, which can be made online.
What is the profitability of Treasury Bills?
Citizens do not know what profitability the Bills will offer in the next auction when making a purchase offer, so there is the option of indicating the minimum interest rate for which they are willing to make the purchase. but there is a risk of being left out of the auction if it closes at a lower rate. Most buyers choose to make non-competitive offers and stay with the price that appears in the auction, without imposing conditions.
What is the import of each Treasury Bill?
The nominal amount of each Letter is 1,000 euros, therefore, the investment will always be this amount or a multiple of it. Treasury Bills do not follow the same system to receive interest as other savings products, since they are discount issues. This means that, at the time of issuance, these securities are acquired at a price lower than the nominal price, in order to receive the 1,000 euros as payment at the time of maturity, with the difference between the two imports being the profitability obtained. For example, if a Bill is purchased at 3%, 970 euros will be paid when purchasing it at auction so that the Treasury will later return 1,000 euros.
Treasury Bill Prices
If you need to recover the money invested before the end of the established amortization period, the Letters can be sold without having reached their maturity, but the client could lose money depending on how the rates offered by the Public Treasury for their purchase have advanced. If the Letter is acquired with a lower profitability than that offered by the public body at the time of sale, the price that one will be willing to pay for the title in the secondary market will be lower than that of the initial purchase.
How to declare the profits obtained in the Letters
Profits obtained from this type of issues are considered capital gains and are, therefore, subject to Personal Income Tax (IRPF). The same tax will be applied as to any savings income, depending on the amount obtained. Thus, the first 6,000 euros will have a rate of 19%, between 6,000 and 50,000 euros it will be 21%, 23% between 50,000 and 200,000 euros and 28% for imports that exceed this last number.
