This week the BCRA could raise the fixed term rate: what should be done?

On Friday the inflation data for March of the National Institute of Statistics and Censuses (INDEC), which was 7.7%, above expectations and far exceeding the 6.6% of the previous month. After the shock of such a high index, investors and savers are now waiting for news from How will the government react? given these numbers, given that the fixed term monthly return It is currently 6.41%, it is 1.3 percentage points behind the evolution of prices for the month.

Thus, a first expected reflection would be a new rise in fixed-term rates, since the objective is to bring them to positive territory with respect to inflation. The increase would have to be higher than 500 basic points, to achieve an effective monthly return of 7.7%, at least. However, the effective annual rate is currently at 113%, so it is still positive with respect to the 110% inflation projection that came from the last Survey of Market Expectations (REM) for the entire year.

However the inflation data for March It could be an indication that the next survey would update this annual projection upwards and that would imply that a rate hike would be unavoidable. In this context, savers begin to analyze what to do with the pesos. Whether or not to renew a fixed term.

Fixed term: should it be renewed?

The Economist Cristian Buteler considers that “it is difficult to know whether or not to renew a fixed term right now because it depends on multiple variables:

• what does the person save for,
• for how long can you leave the money immobilized,
• What knowledge do you have of the world of investments and the financial system and
• whether or not they have access to the purchase of the official dollar”.

However, it points out that, in the first instance, “what is convenient is wait to see if the BCRA modifies the fixed term rate ”. If it does it at an interesting level and, for example, takes it above 80%, the fixed term traditional may be a good option, especially considering that analysts forecast that monthly inflation will drop in April.

And it is that, Ignacio Zorzoli, director of Finance of the Center for Economic Studies Argentina XXI (CEEAXXI)points out that “one of the main advantages of fixed term it is that it is an instrument that the average Argentine investor knows and knows how to handle” and, with the mere possibility of having an account opened in a bank, one can set up and access that instrument.

Fixed term UVA, another option

Zorzoli assesses that “the current rates, taking annual inflation into account, are all attractive, especially considering that the exchange rate remains practically stable”, but warns that the minimum investment period of 30 days can cause complications because demand to leave the investment immobilized for a month.

It may seem like a short term, especially compared to that of a fixed term UVAwhich requires a minimum stay of 90 days, but, the analyst warns that, “in the current context of economic instability, it could be a period of many changes.”

Thus, he points out that there are instruments in the financial markets that have relatively similar rates, but at shorter terms, such as Mutual Investment Funds or stock bonds, which for the conservative investor can become options that complement or even replace the traditional fixed term. .

For Buteler, meanwhile, if the BCRA does not raise the rate, “the best thing would be to put the capital in fixed term UVA, which pays inflation plus 1% and which is for three months”. This option, today, outperforms the traditional fixed term, beyond the long term of 90 days required for permanence.

The economist Federico Glustein, meanwhile, considers that, with the current rates, the traditional fixed term is not a bad deal taking into account the TEA that pays with respect to annual inflation, beyond the fact that the inflation data for March has left the monthly rate quite behind, and points out that it will be more so if the BCRA decides to upload it. “Above all, taking into account that there are not many more investment options with these yields at the moment in the market”, he maintains.

Take into account what comes to decide

However, Zorzoli cautions that if investing in these forward instruments, it is important to keep in mind that the maturities do not come to expire after the primary elections (the PASS)because that will be a period in which “things can become more volatile”.

Thus, when choosing a traditional fixed term or a UVA, the analyst recommends taking into account when the mandatory term of permanence will end before making the decision to renew it. And, on the other hand, analysts agree that no decision of this type must be taken before the BCRA communicates its decision regarding the rates Compared to the inflation data for March, given that if it rises on Thursday, after the board meeting, and the placement is made on Monday or some day of this week prior to that moment, the new rate would not be applied.

This is the time to wait and see what happens with rates. Everything would indicate that They would upload it between Monday and Friday and that the rise would be between 200 and 500 pointsbut it will be confirmed in the next few days.