Spain 5-Year Bonos Auction

The government bonds (Bonos del Estado) are dept securities issued by the government. The investor lends money to the state expecting to receive a pre-agreed interest. The government issues debt securities in order to receive money for infrastructure development or other government spending. The investor receives a guaranteed regular income paid before the maturity date. Although bonds are expected to provide a fixed income, this does not guarantee that the yield will always be positive, since bonds may have deviations in profitability relative to the expected yield, including accidental losses.

By purchasing government bonds, the investor lends money to the government for a predetermined period. The government, in turn, pays coupons to the investor, i.e. a certain percentage paid at fixed periods. Once the bond maturity is reached, the initial amount is returned to the investor. The day when this amount is returned to the investor is considered the maturity date. Depending on the selected bond type, the security may have different maturities: some of them are less than a year, others may exceed 30 years.

The nominal value of government bonds is 1,000 euros or a multiple of that.

Interest on these securities is paid on coupons at certain periods, unlike treasury bills. Interest is paid once a year, while the amount and terms are determined in advance, even before the bond is issued. Government bonds can also be purchased without a fixed coupon, in which case the interest rate may depend on the inflation.

Government bonds have a wide range of amortization terms: from 3 to 5 years for Bono and 10, 15, 30 or 50 years for the Obligación type. The only difference between these two types of bonds is their maturity terms, while this feature can only be seen in the legal field of Spain. Once the 5-year period expires, the name of the first type of bonds Bono changes to Obligación.

The names of bonds may vary in different countries, which leads to difficulties in understanding the general system. For example, French government securities with a maturity of 3 years are called BTAN, while securities with a maturity of 6 years or more are called OAT. Since governments use different names for their bonds, investors are advised to carefully examine all the information before purchasing the securities.

This indicator shows the percentage increase or decrease of government bond yield. The calculated rate of return can reflect Spain's government debt state and thus its increase or decrease can precede economic growth or slowdown.