Treasury bonds are a type of debt issued with a maturity of more than 18 months by a State to generate funding. They entail a payment obligation on the part of the Issuing State before the Debt Holder, structured around two concepts.
- The principal, or the amount invested.
- The interest or coupons paid by the issue over the life time of the bond.
Therefore, the issuer assumes the commitment to returning the face value of the issue on the maturity date, as well as to pay the coupons at an interest rate known in advance on the corresponding coupon payment dates (which tend to be half-yearly or yearly).
The price of the bond will vary over its life time, depending mainly on the interest rate in force at the time at which the price is calculated, the duration of the debt and the credit risk of the issuer as perceived by the market at the time of appraisal.
National public bonds can be issued in different currencies, not only in euros, to cover public currency needs, meaning Treasury issues are available in the main currencies.
Bonds are traded in non-fractional nominal units of €1,000.
These types of asset can be accessed in two ways:
- Primary market (exclusively national): It operates applying an auction and issue process. .
- Secondary market: These issues have already been issued and therefore it is possible to establish the term and interest rate; in this case, you buy on the market at the list price of the debt at a given time, plus the coupon at the time (days from the last coupon paid until the moment of sale adjusted to the % coupon payment of the issue).