euphoria protectors with Public debt is measured in millions. Spanish households closed last year with notable movements in government bonds: 3.233 million euros invested, split between short-term papers and longer-dated securities. The year marked the highest level since 2015, with 2.226 million euros allocated to short-term issues and 1.0.407 million euros to longer maturities, reflecting a robust appetite for public debt among savers as of the end of 2021, driven largely by a surge in the portfolio of individual bonds up to 1.809 million from 17 million the previous year, and a 42 percent rise in bonds and liabilities of 417 million, according to data released by the Bank of Spain.
This first-year increase shows that the government’s debt portfolio has been in private hands since 2015, a year when the figure reached 4.535 million. The growing interest from savers since last autumn is tied to the European Central Bank policy, with rate hikes transferring to Treasury bond yields in an effort to curb inflation. Bank deposits remain a favored saving vehicle for many Spanish households, especially as returns begin to improve in the wake of rate increases.
Despite the rising interest, the broader picture remains that individuals still hold a relatively small share of the total circulating public debt. By year-end, private holdings accounted for a modest 0.26 percent of the total public debt in circulation in Spain, a share that has generally hovered around low levels since 2002 and has shown only a gradual recovery from 0.09 percent in 2021. After recent purchases, private investors accounted for about 45.9 percent of the debt held by residents, with foreign investors comprising the other portion. Banks held about 13.6 percent, insurers 7.2 percent, mutual funds 2.3 percent, public administrations 1.5 percent, pension funds 0.8 percent, non-financial companies 0.2 percent, and other financial intermediaries around 0.1 percent. The Treasury remains confident that private investors will gradually assume more responsibility as central banks reduce holdings.
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Private interest in public debt, particularly short-term instruments, has surged in recent weeks. The Bank of Spain reported queues at its headquarters and on the Treasury website as people sought to purchase securities, with a preference for more affordable options than traditional banks. In January, the Treasury sold 400 million euros and processed loan requests through its website throughout 2022 and the first five weeks of the year, followed by 1.1 billion euros and 700 million euros in the last two weeks of the period. The trend toward increased participation pushed the outstanding debt ratio higher at year-end, rising to 1.727 percent from 1.636 percent the prior year, the first uptick since 2011. New issues show ongoing demand: six-month bills saw a decline of 0.66 percent in December 2021 as the Treasury paid investors less than what they lent, while December last year saw 2.04 percent. Early 2022 data show bonds auctioned with yields around 2.52 percent and 2.998 percent.
The average rate on new deposits across banks in December stood at 0.64 percent, up from 0.06 percent a year earlier, with the eurozone average at 1.83 percent. This has prompted banks to maintain deposit fees at bay, leveraging abundant liquidity and delaying rate increases. This stance is consistent with a broader strategy: higher ECB rates translate into better yields for savers and a potential improvement in the profitability of saving products offered by banks.
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The ECB rate hike has boosted profitability for savers, ending years of negative official money values. Deposit balances have risen slowly, with the Euribor climbing to 3.018 percent, lifting the cost of mortgages and nudging new housing loans higher, aligning with trends across the euro area. Against inflation running around eight percent, both private debt and deposits have faced losses in purchasing power, though government securities retain relative stability. The outlook suggests further rate increases. The market expects reference rates to rise between 3.5 percent and 4.5 percent, while anticipated deposit rates may stay below two percent for the coming one to two years.
Banks have shifted emphasis toward products that keep customers saving rather than paying for deposits. Funds focused on public and corporate debt or capital-guaranteed investments have become more attractive, offering commissions to advisers and a sense of security amid volatile markets. Inverco reports that the Spanish market remains dominated by the main banks, with a growing base of savers and a large number of subscriptions and inflows into fixed-income funds, while the majority of new money flows into public and private fixed-income funds.