When in January dozens of individuals, most of them retired, queued up early in the morning at the door of the Bank of Spain to buy Treasury bills, they had six times more reasons to do so than to stay at home. That was at least the multiple by which the profitability of bills, of 2.8%, exceeded at that time that of bank deposits, of 0.46%. Seeing on those winter mornings something that rented close to 3% was quite an event deserving of a good early start.
Six months later, bills are still a better investment than deposits, but the gap seems to have started to narrow. For now, now they no longer yield six times more, but 50% more. They are remunerated at 3.7%, compared to an interest offered by banks that in June was 2.22% and that is increasing. In percentage terms, in January the difference was more than 2.3 points and now it is less than 1.5 points, in the absence of the Bank of Spain updating bank remuneration with the data for July and August.
While the banks begin to make an effort little by little to attract money from clients, the Treasury is managing to lower interest on bills for the first time so far this year. Yesterday it placed the nine-month rates at 3.7%, below 3.81% a month earlier, thanks to the increased demand and the fact that the market is beginning to anticipate that there will not be many more interest rate rises.
Auriga Bonos analysts agree on this point. “We believe that the profitability of this asset may be reaching its ceiling,” they indicate in a report. Last week the Treasury placed one-year bills at 3.68%, also below the previous auction, with which this type of debt moves away from the 4% that it came close to.
There is another trend. While the longer-term bills, those of twelve and nine months, lower their profitability, the short-term ones, which are three and six months, maintain or raise it. This narrowing in the difference between the long and short term is a new indication that investors are now betting on a stabilization of interest rates.
In yesterday’s auction, the Treasury placed three- and nine-month bills for 2,047 million euros, in the medium range of its objective of trading between 1,500 and 2,500 million. It is little more than the 1,980 million issued a month before.
The big news was the first decline since July of last year in the profitability of nine-month bills. The key was in the demand, which exceeded the supply by 2.2 times, when a month ago it did so by 1.8 times. That encouraged the Treasury to put bills of this type on the market for 1,524 million.
However, the demand from individuals seems to have moderated after the rush at the beginning of the year. Yesterday, the non-competitive purchase requests, which are those that arrive through the web and that come mainly from small investors, were 373 million, when in the auctions a few months ago they reached 40%.
Three-month bills for 523 million euros were also placed yesterday. The profitability of this type of debt, which is the shortest term of those that are issued, remained at 3.53%, the same as a month ago.
While the interests of the letters seem to approach their ceiling, the tendency between the banks is now to begin to be interested in the savings of the individuals and to improve the deposits. At the end of June, they were forced to repay most of the special loans received from the ECB during the pandemic, known as TLTROs, which has reduced liquidity in the system.
Spanish entities returned 38,000 million and are still well oxygenated, but the system no longer swims in liquidity. An imminent trade war over deposits is not expected, but a progressive improvement in their remuneration is.
