Christmas bonus and fixed term: are they a good combination?

With the arrival of the sixth month of the year, the payment of the June bonus arrives, the first complementary annual salary, which workers in a dependency relationship charge and which is equivalent to 50% of the highest income received in the last semester and the great dilemma is how to invest it to protect it from inflation and devaluation. And the economist Cristian Buteler supports this theory by noting that “something has to be done with the money, because, with the current indexing dynamics, it depreciates very quickly”. The options are many, but “the fixed term It is the most traditional and the one chosen by the majority of savers”. But is it really convenient to go towards this instrument?

It is worth mentioning that the advantages of this alternative and that make it the most chosen by the majority of savers is that it is a familiar and low risk instrument which allows relatively quick liquidity (30 days).

However, the economist Federico Glustein believes that “it is not a good option to traditional fixed term because the interest rate lags behind inflation for at least one month”. That means that the yield it offered in May, which was 8%, was probably well below the monthly price index, which is estimated to be above April’s.

Thus, as Buteler indicates, within the fixed-term options, due to the current rate that was implemented, the traditional one does not beat inflation and he believes that, within this group of investments “a fixed term UVA is convenient because it yields 1% above inflationeven with the data that is expected for the inflation of the new month”.

And, taking into account that a UVA has a minimum term of permanence of three months, the decision will depend on when the money is needed, so he considers that one option is to do one part in a traditional and another in a GRAPE.

Primary elections, a variable

Likewise, Eliana Scialabba, director of the Center for Economic Studies Argentina XXI (CEEAXXI), believes that, given the proximity of the primary elections to the Christmas bonus collectionhe traditional fixed termit may turn out to be an investment that suffers from risks taking into account the proximity to the primaries.

“If we take this into account, the possibility that the exchange rate in the stock markets shows an increase in volatility in the weeks before the elections is not ruled out at all. This, added to the impossibility of disposing of the funds for a period of one month, makes the fixed term as an unattractive investment despite current interest rates”, he says.

However, Glustein considers that it may be interesting that, annually, heat the effective annual rate (TEA) of the fixed term is 154%Therefore, at one year, taking into account the performance of other instruments, it may be attractive, especially taking into account that, as has been said, it provides certain security and the possibility of planning.

Likewise, it foresees that it is probable that, given a new high inflation data for May, the BCRA will order a new rate hike next month, so that “the traditional fixed term would yield more, but always behind inflation” . That puts it at a disadvantage compared to the UVA fixed term, but given the traditional volatility of pre-election times, the possibility of shorter-term liquidity is still an important element to consider at this time, with three months to go before the primary elections.