:quality(85)//cloudfront-us-east-1.images.arcpublishing.com/infobae/H2ALEZEREJCEXL7E4V52D4KAAE.jpg "Fixed term: how much do I earn if I deposit ,000, ,000 or 0,000")
With the inflation running at 6% per month according to the latest INDEC data corresponding to last January the struggle between inflation and the fees of interest has become more difficult. The monetary policy benchmark rate and yield floor that banks must pay retail savers for fixed-term deposits. determined time at 30 days, they have been maintained at a nominal annual rate of 75% since last September. This performance was able to exceed the inflation of the last months of last year with a certain relaxation which, now, has become a minimal difference.
In this context, it is worth considering what is the result of placing a fixed term sum in the main banks of the country, how much can be obtained in interest and how these results compare to the depreciation suffered by the peso due to the accelerated advancement of the tier price overview.
The Central Bank obliges banks to pay 75% annual nominal for deposits at one month. This exclusive figure for deposits at 30 day CDD for individuals and for less than $10 million implies a direct return of 6.16% in 30 days. In other words, barely more than the January inflation data.
In terms of exchange, the interest rate – at least so far – has fared much better against the dollar than in its fight against inflation. The free dollar, at $375 for sale, has advanced a mere 8.3% so far this year, well below two-month yields on a futures investment.
Given inflation expectations for the coming months, the bowl interest on deposits determined time it will be more difficult to beat the rise in prices, at least in the immediate future. According to the Market Expectations Survey with which the Central Bank consults fifty specialists regarding its forecasts for the main macroeconomic variables, the February data that INDEC will publish this month is expected to be 6.1% – practically linked to the fixed-term monthly rate – March data topped peso yields with a record 6.3% and the figure eased slightly in April with a 5.9% rating.
With the nominal annual rate of 75%, however, the yield in pesos has a better chance of pushing inflation in the longer term. In fact, in effective annual terms, the fixed term yields a yield of 107.05% today. This performance is achieved in 360 days with firm periods of one month, successive, for twelve consecutive placements. As long as, of course, with each new deposit, the initial capital and the interest collected are reinvested and no pesos are withdrawn.
Thus, yields on fixed terms have the potential to beat inflation over the medium term, albeit in a tightly adjusted fashion. But what does this mean in terms of nominal returns? How much can be achieved in terms of results by putting savings into this type of deposits?
A fixed term of 30 days per $10,000, with the current rate of 75%, yields 10,616.44 pesos once the term expires. That is, the $10,000 in initial principal plus $616.44 in interest. In annual terms, twelve consecutive fixed terms in which principal and interest are reinvested each time, yields $20,499.63 after 360 days (assuming the rate remains stable).
A fixed term of 30 days per $50,000, with the current rate of 75%, yields 53,082.19 pesos once the term expires. That is, the $50,000 initial capital plus $3,082.19 in interest. In annual terms, twelve consecutive fixed terms in which principal and interest are reinvested each time, yields $102,498.17 after 360 days (assuming the rate remains stable).
Similarly, if the initial capital was $100,000after 30 days of placement the result that would be obtained would be 106,164 pesos. In one year, by reinvesting both capital and interest each month, the result would amount to 204,996.34 pesos.
On the other hand, if the initial capital was $1,000,000after 30 days of placement the result that would be obtained would be 1,061,643.84 pesos. In one year, reinvesting both capital and interest each month, the result would amount to 2,049,963.41 pesos, adding capital and interest.
At present, the traditional fixed durations to 30 days for natural persons and for not more than 10 million dollars pay a bowl 75% in nominal annual terms, which becomes 107.05% in effective annual terms.
The regulations which weigh on the interest rates oblige the entities to offer not less than 75% of annual nominal to the private individuals, for the deposits lower than 10 million dollars. However, there are isolated cases with lower yields.
Some entities pay less than 75% of the annual nominal.
Continue reading: