Saving is not always an easy task. Many families make real efforts each month to have a surplus that allows them to have a certain margin of maneuver in case they come up badly. But, if saving is by no means an easy task, it is no less difficult to choose the savings product that best suits our needs.
In this sense, fixed income products have traditionally been the most demanded by savers. Its almost guaranteed profitability at maturity and its reduced risk are the main reasons why many people end up opting for this investment formula, among which the public debt stands out, represented by Bonds and Treasury Bills.
However, although bonds remain a safe investment formula, it is currently not the most profitable. In a context of low interest rates like the one we find ourselves in today, fixed income products have lost some of their attractiveness in relation to others that, despite their higher risk, provide higher returns.
Not surprisingly, the good economic news of the day in the media has been in recent months, precisely, the new historical low of the risk premium and the ten-year bond of the Kingdom of Spain. Great news for the public coffers but not so good for savers looking for a return on their savings.
And for example, a button: if we access the website of the Public Treasury, we will be able to see the price of the bonds in the last auctions in public debt issues. For example, the twelve-month bills provide a return of 0.213%; the five-year bonds, 0.849% or the ten-year bonds, 1.731%.
In other words, if we waive the immediate availability of 1,000 euros of our money for a year to invest it in Twelve-month Treasury Bills, we will obtain 2.13 euros in total, that is, practically nothing and there would be almost no difference between holding our money in cash or invest it in letters to one year.
However, it must be said that Treasury Bonds are a very attractive investment instrument for institutional investors, especially pension plans and fixed income investment funds and guaranteed investment funds, due to their reduced risk and uncertainty at maturity. In addition, by acquiring public debt, we are providing very valuable economic resources for our country so that it can finance important public services such as education and health; an effect that is not seen but that is important to consider.
So, do I invest in fixed income or not?
Treasury Bonds are strongly conditioned by the decisions of the European Central Bank in monetary matters. The lower the interest rates, the easier it will be for those who want to borrow money to apply for a loan, including a State and, therefore, the less profitable the investment will be for those who lend the funds. This is precisely what is happening today: historically low interest rates and public financing costs.
In any case, the lower the profitability, the lower the risk may be attributed. Bonds have traditionally been the safest fixed income assets, having the backing of an entire state behind and, as if that were not enough, the European Central Bank. It is, therefore, a good option? Like everything, it depends on our profitability objective and our aversion to risk.