In the field of finance , is called Title to the document that allows the representation of a security or public debt. The public titles in fact they are the financial instruments that represent the debt that emits some state agency .
This means that public titles can be linked to the debt which issues a national State, a regional State (provincial, departmental, etc.) or a municipality, among other administrative-political units that depend on each country.
The public title can be understood as a payment promise . Who issues the public title assumes the commitment to return the funds that are lent to him along with the agreed interests and in the established terms. An investor, for example, can acquire a public security for a value of 50,000 pesos which, upon expiration, grants an interest of 5% . He State who issued the public title, therefore, is obliged to pay the corresponding amount once the document expires.
It is important to keep in mind that issuing public securities is one of the mechanisms available to the State to obtain resources and finance its activities. The issuance of money, the request for credits in international organizations and the increase or creation of taxes They are other options.
In addition to the information we have provided, it is important to know that the State can issue public securities for several reasons, among which the following stand out:
-The money you are raising through taxes is not enough to cover all the expenses you have.
-It is a measure that you can take to carry out what is an important part of your monetary policy.
-It is the way he finds to be able to finance certain infrastructure projects that he cannot support in any other way.
Due to its characteristics, the acquisition of public securities is usually considered as a investment of low risk, since the States are usually solvent and the profit is assured while the investor retains the title. There is a possibility, however, to sell the public security in the capital market before its expiration.
To all the information that we have exposed so far it is worth adding another, which refers to the fact that public titles can be classified into different groups and types based on different criteria:
-According to the currency of the issuer, there are domestic or foreign currency.
- Based on what is the hierarchy of its issuer, they can be grouped into municipal, provincial and national.
-Departing from what is a form of placement there are mandatory and voluntary.
-If we start from what is the term in which they will proceed to cancel, we have them in the short term, which are those that will not last more than one budget year; in the medium term, which are the ones that will be canceled in a period of between 3 to 5 budget years, or in the long term, which will last more than 5 budget years.
-According to their nature, they can be internal debt or external debt.