Fixed term to one day: how to do it and what performance it pays

The current levels of inflation in Argentina they pose a challenge to safeguard the purchasing power of money. For example, to measure the magnitude of the problem, if at the beginning of last year you were left with $1,000 without investing, at the end of the year you will be able to buy half of the goods and services with those $1,000.

This is why today, one of the main questions that Argentines ask themselves is how they can do to protect their purchasing power. In this sense, it is key that the money is invested every day, even thinking about expenses that have to be made from a Friday to the following Monday. The stock bond is a great ally.

Stock market guarantees could be defined as “the fixed terms of the stock market” although, it is important to highlight that they have different characteristics that, from our point of view, make them a much more interesting instrument than the traditional fixed term.

One of the main differences is that, instead of lending money to the bank, you lend to other investors and with considerably shorter terms than a fixed term. In general, the terms that operate the most are those of 1 to 7 days. Although the rates that operate are usually below a fixed term, they have the flexibility of not having a maturity of 30 to 90 days.

Currently, nominal annual rates (TNA) of 68% are observed, which implies a return in the month of 5.8%. Although the interest rate is below the fixed term, they can be invested from one day to the next and are ideal when one has to allocate excess funds in less than 30 days.

Reasons to invest in Sureties:

• Liquidity and Volume: Sureties are one of the most traded instruments in the market and have possible terms ranging from 1 to 120 days.
• Certain profitability: When a surety is operated, the underwriter lends money to the borrower and obtains an interest rate agreed upon in the operation. Taking this pre-established interest rate into account and calculating the effective rate for the number of days of the surety operated, one can know the return on investment from the beginning.
• Warranty: Surety bonds are operations backed by titles that the policyholder provides as a guarantee of payment. These titles are placed in a Guarantee Fund with a capacity established according to the regulations of the National Securities Commission (CNV) and BYMA regulations. This capacity is a percentage established for each negotiable security that is delivered as collateral in such a way that the underwriter covers 100% of the collateral.

yields

To date, the sureties with the highest volume operated have an average monthly rate of 5.8% and a weekly rate of 1.5%. To give it as an example, and taking this long weekend, if you invest $100,000 from Wednesday to the following Monday, you will be generating almost $1,000 of interest, which is compared to $0 that a bank pays. Therefore, it is worth investing.

Head of Research at IOL investoronline