The General Secretariat of the Treasury and Financial Policy under the Ministry of Economy and Competitiveness, has given a judgment on which revises the procedure for awarding points to protect the small investor to the possibility that the auction of this paper, especially if it is in short terms, for negative returns.
On Thursday, the market secondary interest of three-month bills came to be in the negative for the first time in history, to be exchanged at a figure of -0.020% environment. This type of paper takes several months to sell at auction rates close to zero and no greater than 1% since 2012, however, it is the first time in history that is recorded negative rates.
The last time these titles were taken to auction, on 22 July, 640 million were sold at an average yield of 0.127% and 0.138% marginal. The next week the government will hold another issue letters to 3 and 9 months and expects the numbers to continue to fall, so the interest could also be in negative numbers in the primary market.
So and to “protect the interests” of the subscribers of public debt, the Treasury has introduced a new paragraph in the resolution passed earlier this year explaining the auction calendar and celebrate the subscription process and development of debt State.
The Treasury believes that the introduction of this paragraph in the resolution is advisable before the result of the last auctions of Arts, with near zero returns and the possibility that the same could be negative in auctions celebrate this outstanding role, especially in the shorter term.
Economics states that the allotment price to pay for Treasury bills will be price equivalent interest rate or price request rate equal to the weighted average interest rate, depending on the outcome of the auction. It also states that no competitive bids and award price will, in all cases, the rate equal to the weighted average interest cost.
However, the resolution clarifies that non-competitive bids will be given not presented when the rate equal to the weighted average interest proves price exceeds 100% of nominal value. Thus, the requests made through this form are automatically declared as submitted if the average increment is negative.
The equivalent price capitalization calculated by simple letters issued to a period equal to or less than the calendar year, inclusive, and issued capitalization consists in a longer period. Although the prices of calls are published to three decimal places, for the purpose of calculating the amount payable by the nominal awarded in each request, prices will apply “to all decimal.”
measured auctions 2014 and January 2015
The Economy Ministry noted in a note noncompetitive requests are those in which the buyer states apply the amount you want to purchase, but not the minimum return you expect. These acquisitions are allocated to the weighted average. The rules have not changed, the system would have led to small investors lose money if profitability falls below zero.
The provision, published Friday in the Official State Gazette (BOE) will apply to all auctions that are held letters for the remainder of 2014 and January 2015.
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