Today, the Treasury issued its first May bond issue, with yields higher than those of the April deposit, reflecting the new interest rate hike decided by the European Central Bank last week, for another quarter of the spot rate. The average interest rate is about the same in the two quarters: 3.129% for six months and 3.216% for twelve months.
At today’s auction, for the first time this year, the interest on treasury bills has already crossed the 3% threshold, standing at the highs of 2012. The treasury sold 900 million euros for the term with strong demand, which exceeded supply by 3.67 times. At the previous auction, in April, the average price was 2.994%.
The Treasury put another 3,845 million euros into the twelve-month bills, also at a higher interest rate than the previous auction. It rose to 3.216% from 3.128% in April, in parallel with the rise in the price of money in the eurozone. Over the twelve months, demand has exceeded supply by 1.43 times.
Interest at six months and one year already in both cases above 3%, in the region of the maximum for 2012, and almost at the same level. The yield paid by the Treasury in the shortest term rose sharply. In the nine-month auction in April, the rate also exceeded 3%, reaching 3.169%. Investors focus their appetite on these shorter terms, in a strategy whereby they will squeeze the maximum yield out of these assets before the eventual change in the direction of interest rates shifts demand towards longer terms.
Treasury bills have become an attractive alternative this year for smaller, more conservative-looking savers whose profitability far exceeds what banks average for new deposits. In March, the profitability of new deposits with a term of up to one year increased significantly, from 0.76% to 1.36%, but it is still much less than the 3.216% that the Treasury is currently offering in the form of bills.
Participation of small savers in bill auctions has doubled in recent months, given the increase in yields, and given that the big banks barely pay more for deposits despite higher interest rates. There are still a few small online entities in the battle for the profitability of the savings, with deposit offers in excess of 3% APR. This is the case of EBN Banco, Renault Bank, Banco Finantia Branch in Spain, Facto and Wizink.
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