The Spanish debt yield curve is normalizing. The profitability of The Spanish 10-year bond is currently at 3.15%, above the 3% offered by the Letters 12-month Treasury bonds on the secondary market (where the securities are traded after being issued at auction, and to which the individual also has access). The spread that is opening up between the two assets, these 15 basis points in favor of the ten-year bond, has not been so wide since November 2023.
It should be remembered that for much of 2023 and 2024 we witnessed an unusual situation in Spanish sovereign debt: 12-month bills offered a higher yield than 10-year bonds. In other words, Investors got more return by lending their money to the Kingdom of Spain for a single year than by lending their money to the Kingdom of Spain for an entire decade.. But now the start of rate cuts is divestment this curve. Since the beginning of August, after the first drop in rates in Europe, the paper The Spanish term of 10 years returns to the rent more than the 12-month letter, which has not happened in a sustainable way since November 2023.
Result of the last auction of Letters
This Tuesday, September 3, the Public Treasury held its monthly auction of 6 and 12 month bonds. During the 12-month period, the organization sold 4,079.8 million euros and the average interest rate was 2.954%.exactly the same as the last broadcast, that of August 6th. This auction at the beginning of August marked a before and after in terms of profitability of the Letters: the interest paid fell below 3% for the first time since February 2023. This might interest you: Investor returns from vacation without the security of getting a “guaranteed” 3% return.
Concerning the 6-month bonds, the amount placed amounts to 1.284 million euros and the average interest was 3.238%, below the 3.252% of the August auction.
Early 2023, Investors line up at the Bank of Spain to buy 1-year Treasury bondsunprecedented thing, in search of yields that would allow them to protect themselves from inflation. At that time, this bond asset offered around 2.8%. This yield continued to increase in the following months, until reaching 3.9% in September 2023, a maximum not seen since 2012. Since then, and in anticipation of a drop in rates in Europe, it has been gradually reduced.
The market is currently expecting cuts totaling 100 basis points from the US Federal Reserve by the end of the year, according to Bloomberg. The first cut is already a given this month, at the meeting on the 18th. For Europe, expectations are for cuts of around 50 to 75 points by the end of 2024.
