Syndicate
Public Funds
Public funds, also called public effects, are fixed-income securities corresponding to debts issued by the state and other public institutions. They usually have a medium-term or long-term maturity date, which differ them from Treasury bonds that have a lesser term.
In Spain, public funds, as debentures and other fixed-income market which is a continuous contracting electronic market.
We, basically, include in the group of public funds the following type of securities:
State?s public debt: state bonds and debentures differ, above all, because of term that is longer for debentures. Thus debt is negotiated in State Listed Debt Market which is an electronic market.
Official organizations debt as the Official Credit Institute, Industry National Institute or the Housing National Institute. When these organisms issue a debt to fund loans with mortgage guarantee, the securities should be referred to as mortgage certificates, which have a longer term than debentures. The mortgage certificates are debts issued by an entity that invests in funds obtained in loans that have a mortgage guarantee.
- Debts issued by parts or the Board of Public Work
- Public debt from autonomous communities
- Public debts from city halls and any other local corporation as delegations.
- Debt from public companies
- Foreign securities with state guarantee
- Public funds have the following characteristics:
They count with the state?s guarantee or with the issuing public entity. Therefore, they are very safe.
They usually provide important fiscal advantages that increase their profitability.
The type of interest they offer tends to be lower than those fixed-income securities issued by private companies. However, this is usually compensated by the previous characteristics.
Based on the reimbursement terms they can be temporary (its last maturity date is pre-fixed) or perpetual (the principal is never reimbursed as in the state’s perpetual debt). There is an internal and external public debt, being the latter issued outside Spain.
When the public debt can be used as a collateral to guarantee loans, it is called pignorable public debt.