Guide to buying treasury bills

Buying Treasury Bills has become a favorite investment for savers. However, this was not always the case. For many years, yields were severely limited by the negative interest rate policy of the European Central Bank (ECB). However, since the ECB initiated a new policy of rate hikes, the most vertiginous in history, this financial asset has aroused a real furor.

This fever for Treasury Bills has led to major changes. From the way of acquiring the securities, to the presence of individuals or the creation of new investment vehicles to take advantage of their virtues and limit their disadvantages. If you want to know more about all this, read on.

What are Treasury Bills?

”Letras del Tesoro” are nothing more than Spanish public debt: that is, securities issued by the Public Treasury that offer a yield in exchange for the money borrowed from the buyer. Their main characteristic is that they have a very short term maturity, between three and 12 months.

Other characteristics are that there are four types: with maturities of three, six, nine and 12 months. Also, if you go directly to buy them, you will need to make a minimum investment of 1,000 euros and thereafter multiples of that amount. Finally, profitability is obtained in the form of a discount.

Buy Treasury Bills: secure payments and discount collection

Bills pay at a discount, which means that the price paid is less than their nominal value and, by extension, less than the money you will receive at a later date. For example, imagine that the yield at that moment is 3%. In that case, you would buy one of these securities for 970 euros and, at maturity, the State would return 1,000 euros.

Lastly, bear in mind that as it is debt guaranteed by the Spanish government, it is a very safe product, since the country backs it. In addition, the fact that it is short term makes it more secure.

How to buy Treasury Bills?

You can buy ”Letras del Tesoro” in different ways: directly, online or at the Bank of Spain, through an intermediary or, most interestingly, indexed to funds or indexes that track the behavior of public debt. As you will see below, each alternative has its pros and cons, although the last option is the most advantageous.

Buy Treasury Bills directly

Buying ”Letras del Tesoro” without an intermediary is possible, although not easy. The most convenient option is to do it through the Internet, for which you will have to enter the website of the ”Servicio de compra-venta de Letras del Tesoro, Bonos y Obligaciones del Estado (Treasury Bills, Bonos and Obligaciones del Estado)”. First, however, you will need to have a Direct Account, that is, a securities account with the BdE, which is free and will allow you to carry out the operation.

On the other hand, you can go to the Bank of Spain’s branches to open your Direct Account and start trading. However, due to the high demand, you will only be able to do so if you have an appointment.

Buying Treasury Bills through an intermediary

If you think that this process may be too complicated, you also have the option of using a financial intermediary, that is, a bank or specialized company that will help you buy Treasury Bills. However, keep in mind that the costs will be higher, since each entity or firm has different fees for helping you in the process.

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Buying Treasury bills (and government debt) passively

An alternative option is to invest in Treasury Bills by contributing money to different funds indexed to a debt portfolio. Indexed bond portfolios are optimized instruments with financial instruments that seek to follow the return offered by public debt (either short or long term). In addition, these types of instruments can include debt from other countries, also of the highest quality, or incorporate the tracking to some type of monetary fund, thus achieving less volatility and more profitability.

What is the most advantageous way to buy Treasury Bills?

The most advantageous way to buy Treasury Bills is undoubtedly to do so through an index fund or similar ETF. Among the reasons are:

  • Liquidity: if your investment in public debt is articulated through a fund or an ETF, you always have the possibility of selling your participation. On the other hand, if you have a Treasury bill or a bond, and you need to recover your money, you will have to go to the secondary market and use an intermediary. In the end, the process is more laborious and expensive.
  • Diversification: in principle, public debt is safe. But that does not mean that its value does not fluctuate and, more importantly, that if other products are added, such as debt from other countries, a higher return can be achieved.
  • Simplicity: carrying out the direct process to buy ”Letras del Tesoro” is not particularly complicated, although it can be tedious. Especially if it is the first time, and you do not plan to invest a significant amount of money. The other alternative is to use an intermediary, but that increases the cost. However, using an index fund is much simpler, especially if you have an account on an investment platform.
  • Cheaper: the idea of betting on an investment vehicle that is indexed to public debt ends up making the operation cheaper. Firstly, because large investors usually get better prices at auctions. Secondly, funds or ETFs have tax advantages, since they differ in the payment of taxes. Finally, if your investment platform has reduced costs, it will be much better than using an intermediary, and it is much more convenient.

Buy Treasury Bills through inbestMe

As you have seen, the idea of betting on passive investment to benefit from the profitability of fixed income is the best idea. But first you have to choose well the platform you are going to hire. inbestMe is a great alternative, an easy-to-use platform, with a long experience in the investment world and with reduced costs. In addition, it is always focused on making its users’ assets grow at the pace of each investor’s profile.

In this case, inbestMe has a wide range of options to create your own portfolio of bonds or bills through its funds or ETFs. Moreover, from a minimum investment of just 1,000 euros and with costs that are reduced as you invest more money. Finally, the platform also offers personalized advice, automated management and investment strategies adapted to each risk profile so that you can make the most of the advantages offered by these types of assets.

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