Investing in government debt in 2025: Advantages and disadvantages

Each person has their own list of priorities, and this affects not only life but also investment decisions. In this context, we find two types of investors: those who prioritize profitability at the top of their list, leading them to choose high-risk products, and those who place security first, especially when it comes to safeguarding their savings. It is within this latter group that we find those who prefer investing in public debt.

In 2025, investing in public debt remains an attractive option for many investors seeking security and stability in an often unpredictable economic environment. However, it is crucial to fully understand this instrument and its characteristics to make informed decisions.

Below, we will analyze how public debt works, its types, and the benefits and drawbacks of investing in this asset.

What is public debt?

Public debt refers to the financial obligations issued by a government to finance its budget deficit or infrastructure projects. Investors who purchase this debt lend money to the government in exchange for a fixed interest rate, generating returns over time.

Governments issue public debt through the sale of bonds, treasury bills, or notes, which can be acquired by both institutional and individual investors. The government commits to repaying the principal along with interest within a specified time frame.

When investing, you are economically supporting an initiative. Often, this money is directed to businesses, ranging from small crowdfunding ventures to large multinational corporations listed on the stock market. However, it is also possible to support governments.

Just as companies require capital, countries also need funding. To raise that money, they issue public debt securities. Citizens acquire these fixed-income securities, temporarily lending a portion of their money to the state. Once the term expires, they not only recover their initial amount but also earn a specific interest, representing their profit.

Is investing in public debt safe?

Investing in public debt is one of the safest alternatives available today. Why? Because it is backed by an entire country, and the auctioned products offer fixed returns. Considering these two points, the saver knows in advance what their profit will be.

Thanks to this certainty, the investor eliminates uncertainty and knows that their profit will not depend on market fluctuations.

It is essential to note that from the moment an investor decides to invest in public debt, they know from the outset that they will not face losses. Regardless of the circumstances, the returns are guaranteed. This allows for a much more focused and precise investment strategy tailored to their situation.

Types of public debt available

When considering investing in public debt, simply knowing it’s an option is not enough. Investors can choose between different types of public debt that, although they operate similarly, have specific differences.

The main differences lie in the duration for which the money is committed and the method of payment.

Treasury bills

This is the most appealing option for those looking to invest in public debt with quick returns. Treasury bills are short-term instruments issued for three, six, nine, or twelve months. This makes them an attractive choice for conservative investors seeking quick liquidity and low risk.

The interest on this type of investment is collected at the end of the term, which, in some cases, can be as short as ninety days.

Government bonds

This is the intermediate option, with repayment occurring after a period of more than two years but less than five years. Unlike treasury bills, payments are not made at the end of the term; instead, the investor receives periodic payments through coupons, usually on a monthly basis.

Government obligations

This alternative is only recommended for individuals with a financial cushion, who do not need to access their savings in the short term. Government obligations have a minimum duration of five years, although in some cases, they can last several decades.

And what about the payments? They operate similarly to bonds, with the saver receiving regular interest payments through coupons.

International bonds

It is also possible to invest in bonds issued by foreign governments. These can offer attractive returns in emerging economies, though currency risks and local monetary policies must be carefully evaluated to ensure they align with the investor’s circumstances.

Is investing in public debt profitable?

A common question among investors is whether investing in public debt is genuinely profitable. While the answer is yes, there are specific considerations to keep in mind. Here lies another key difference among the various types of public debt.

The profitability of investing in public debt varies depending on the type. Evidently, the returns on treasury bills differ from those on government obligations.

The longer the maturity date, the higher the interest rate offered to the investor, typically around 3%.

Advantages of Investing in Public Debt

• Security and low risk - Public debt is considered one of the safest investments as it is backed by the state. In times of economic turbulence, governments often honor these commitments to maintain financial credibility.
• Profitability in high-interest-rate environments - In 2025, with interest rates at elevated levels due to economic recovery, public debt offers competitive returns compared to previous years. This makes it an attractive option for those seeking stability with reasonable returns.
• Liquidity and Flexibility - Many public debt issues can be traded on secondary markets, allowing investors to liquidate their positions before maturity, providing financial flexibility.

Drawbacks of investing in public debt

• Limited returns compared to other assets - Although public debt is safe, its returns are often lower than those of riskier financial instruments such as stocks or investment funds. This limits its appeal to those looking to maximize capital growth.
• Inflation risk and loss of purchasing power - If inflation rises faster than public debt yields, investors may see a reduction in their purchasing power over time. This is a significant risk in 2025 as inflation remains uncertain.
• Duration of investment and impact on returns - The investment duration can influence the returns. Long-term bonds may lose value if interest rates rise, affecting the total profitability for investors.

Factors to consider in 2025 before investing

Before investing in public debt in 2025, savers should evaluate several key factors:

• Global Economic Environment - The global economic landscape in 2025 remains volatile due to post-pandemic recovery effects and geopolitical developments. It’s crucial to analyze market trends and macroeconomic risks before investing.
• Monetary and Fiscal Policies - Central bank decisions on interest rates and government fiscal policies have a direct impact on public debt yields. Staying informed about these policies is essential to adjust investment strategies accordingly.

How to invest in public debt

Public debt securities are acquired through the Public Treasury, the entity responsible for issuing and managing them.

Investors must note a minimum purchase amount, set at 1,000 euros, with additional increments required to be multiples of this amount.

Moreover, it is not possible to purchase treasury bills, bonds, and obligations at any time. There are specific auction periods throughout the year during which these assets are available for purchase.

Investors can also choose between two main methods of investing in public debt:

• Direct Purchase from the Public Treasury - Transactions can be made in person at the Bank of Spain or online through its website.
• Investment in Specialized Funds - This option is more convenient for individuals as it allows them to select their ideal risk profile and delegate management to professionals.

Is it a good time to invest in public debt in 2025?

Once the types of products, investment mechanisms, and taxation considerations are understood, investing in public debt is accessible to anyone. Thus, investing in public debt in 2025 can be a good option for those seeking stability in an uncertain economic environment.

However, it’s essential to weigh the advantages against the drawbacks and consider diversification into other investment alternatives, such as those offered by platforms like Inversa, to enhance overall profitability and reduce risk.