The Treasury Bills face this Tuesday, January 7, its first auction of 2025, after months of drops in its profitability. The 12-month debt of the Kingdom of Spain paid 3.40% half a year ago, comfortably above the 2.32% currently offered in the secondary market (where these securities are bought and sold once issued). The reason for this decrease is none other than the rate cut that the European Central Bank (ECB) began in June. Still, in recent weeks that performance has seen an uptick.
And it remains to be seen what happens in today’s auction, Tuesday, the first, as we say, of 2025. In the previous issue of 12-month bills, which was held on December 3, the Treasury had to disburse 2.207% ( this was the average interest rate). In reality, auctions have been closing, almost without exception, at lower interest rates each month. The Letters offer 100 points less profitability than at the beginning of the year.
The time when the profitability of Letters generated long queues at the doors of the Bank of Spain seems long gone. That happened in 2023, a year in which the performance of 12-month debt reached 3.92%, its highest level since the peripheral debt crisis that Europe experienced in 2012.
In today’s auction, 6-month bills will also be placed. In the secondary, these securities are currently trading at 2.56%, also after having suffered a sharp decline in their performance. In the previous issue, that of December, the average interest rate was 2.55%. Regarding 3 and 9 month Bills, the first auction of 2025 will take place on Tuesday, January 14.
The pace of cuts in the price of money in Europe has been noticeable in recent months in the profitability of Letters. The European Central Bank (ECB) has carried out four rate cuts in the last seven months: in June, September, October and, the most recent, in December, each by 25 basis points. The market still anticipates cuts of more than 100 basis points in Europe a year from now, according to Bloomberg.
Regarding the Spanish 10-year bond, in mid-December it managed to recover 3% and since then it has remained above that level; It is currently at 3.109%.
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