Christine Lagarde-Beware of BTPs, BOTs, deposit accounts and Postal bonds-proiezionidiborsa.it
The ECB has increased the cost of money, causing a rise in yields on the market. The news might sound good, but it also has its downsides. The president of the ECB said that the hikes are not over yet. This decision will lead to changes for those who invest in bonds, government bonds and deposit accounts.
The increase in the cost of money by half a percentage point, from 2.5% to 3.0%, marks i highest rates for over a decade. The extent of the rise is significant. Furthermore, Christine Lagarde’s statements during the press conference that followed the ECB’s decision are important for understanding the implications. This decision will provoke important impacts on theeconomy and on investments of all savers.
2 fundamental aspects that will influence returns in the coming months
The president of the ECB, Christine Lagarde, has hinted that the latest hike in the discount rate may not be the last. The ECB’s objective is to bring inflation in Europe back to 2%, while it currently exceeds 8%. The current scenario pays off a further increase of half a point is likely percentage in the March meeting.
Also in the press conference on the sidelines of the decision, Lagarde underlined how the economic growth in the euro area has slowed down in the fourth quarter. Furthermore, the president of the ECB foresees a continued weakness in the next months. These statements and the latest inflation data in Europe, high but declining, prompt analysts to a rather realistic assumption.
Beware of BTPs, BOTs, deposit accounts and postal bonds in the new economic scenario
If money market yields increase, it means that i interest rates are higher. Therefore the investors can earn more on their financial assets short term. But increasing the money supply can also pay off long-term investments are less attractive. Furthermore, an increase in the cost of money can make rising debt costs for companies and families. The demand for loans could be reduced and consequently, the economic expansion. Furthermore, the increase in yields also weighs on the cost of public debt.
Now it is important to pay attention to BTPs, BOTs, deposit accounts and postal savings bonds. As the ECB continues its hikes, the short-term investments such as BOTs and deposit accounts are favored. The state will offer higher rates in BOT issues with yields rising. Banks may also offer higher interest on deposit accounts. Instead, i long-term securities such as BTPs and postal bonds could suffer. However, they could become the protagonists of a spectacular ride in the coming months.
The hypothesis of the analysts and the opportunities of the BTP
A possible slowdown in economic growth in the coming months, close to zero, it could further reduce inflation. In this scenario, one would be possible suspension of rate hikes of interest by the ECB after the next. That would be a good time to invest in BTP and interest rate bonds
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long-term fixed. These stocks could see appreciation due to a reduction in inflation.
