Spain 9-Month Letras Auction

Letras del Tesoro are short-term and discounted treasury bills released by the General Secretariat of the Treasury and Financial Policy. These debt instruments have a maturity of 3 to 18 months. An investor who purchases treasury bills can receive resulting interests at maturity.

Letras del Tesoro have the shortest liability period compared to other types of government debt instruments. Such treasury bills are usually issued for 3, 6, 12 and 18 months. The bills are issued for no less than 1,000 Euro or multiple of it. This type of treasury bills is traded on the capital market because they imply short-term deals. Government bonds, on the contrary, require more time for a deal, which is a period from 3 to 5 years. The longest maturity is that of government obligations: from ten to fifty years.

The investor purchases government securities in accordance with their purpose. Treasury bills are expected to achieve financial result in a short time and at a low cost due to their liquidity and relatively low risks.

From the point of view of the country issuing treasury bills, the government uses the markets to receive money and takes the liability to return them back with the previously agreed profit margins. Thus the resulting amount and payment terms are set in advance.

The risk level of such securities is considerably lower than that of private instruments. Accordingly, the profitability level of treasury bills is much lower than that of private assets. Thus, treasury bills are considered to be the least risky and most reliable instruments for obtaining a financial result in a short period of time.

Treasury bills Letras del Tesoro:

• have rather low risks
• have low profitability
• have a short maturity period
• do not have coupons

Treasury bills are issued with a discount and differ from other government securities in that they have zero coupons. In other words, the investor does not receive any interest at the time of purchase and at the end of the bill validity period. But it is possible to receive the so-called nominal value: the purchase price can be less than the amount received at the expiration date. Thus, the bill buyer receives the "expected yield", which is equal to the calculated difference in percentage between the nominal value and the price paid on the bills.

This indicator shows the percentage increase or decrease of treasury bill 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.