No more public debt is contracted because the banks do not want

Currently the profitability of public debt is above 5% in all its terms, above the best deposits in the market, and its risk is equal to or less than that of accounts and deposits, since it is constitutionally guaranteed by the State. Spanish, one would think that there is a significant transfer of savings from banks to the State.

However, the small saver continues to invest in deposits instead of bonds and government bills, for the most part. The reasons we have to find them in:

Ignorance of the product, compared to the popularity of paid accounts and deposits.

The relative difficulty of contracting public debt directly: to do it through the Treasury website, an electronic ID and reader are required; To contract it in person, you must open a direct account at the Astro Bank (it is not complicated, but this body does not have headquarters in all provinces).

The disinterest of banks for this product, which makes it difficult for customers who want to buy debt from their own branches or actively recommend other products.


Public debt risk

debt loans

Does it make sense to think that Spain is more likely to default on its obligations than the banks settled there? The answer, in our opinion, is no .

A country is safer than the national banks located in it. After all, what makes deposits very safe is that the State guarantees them (up to 100,000 dollars) through the Deposit Guarantee Fund. If it were not for this, there would be entities that would not be able to capture savings due to the high profitability they offered.

Public debt is guaranteed by the state, unlimitedly, and with the recent constitutional commitment to give it absolute priority. This guarantee is understood to be equal to or stronger than that of deposits, unless the bank is diversified and healthy enough to withstand a bankruptcy of the State (which is not a small request).

It is true that there is a risk of losing money if we invest in debt and need liquidity before maturity. In this case, we would have to sell on the secondary market, at the current price. However, this risk does not exist if we keep the securities to maturity in our portfolio.


Public debt profitability

Public debt profitability

Let’s see first how much the public debt is paid if it is bought directly in the corresponding auctions or primary market:

  • 6-month bills: 5,227%
  • 12-month bills: 5.022%
  • 10-year obligations: 6.975%

Now let’s see the best deposits for these terms :

  • 6-month deposit from YesDeposit Bank: 4.25%
  • 12-month Best Bank deposit: 4.40%
  • 5-year Cream Bank deposit: 3.95%

At 10 years, it is not very usual to contract deposits, and to know this type of returns you would have to request them on a case-by-case basis with financial institutions. The best long-term deposits usually do not exceed 5 years.

The risk of public debt is equal to or less than that of deposits, and its return is higher. There are many reasons for the small saver to invest in this product, and nevertheless your branch manager , almost certainly, will not recommend it to you when you come to advise you.

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