Higher inflation forecasts raise concern among savers, because it can change the equation with respect to what happens to be the most convenient fixed term, between the traditional and UVA options. It is that depending on the type of projection on the prices of the economy that is analyzed, which can be optimistic, moderate or pessimistic, it will vary to know if one type of placement is better, or not, with respect to the other variant.
The last official measurement of the Indec of inflation determined that in January it was 6% and for last February estimates place the consumer price index (CPI) at around 6.1% Under this scenario, it is expected that this level will be higher in March.
In this way, this reference is getting closer and closer to the profitability offered by a traditional fixed term, which is 6.2% per monthor 75% nominal annual fee (TNA).
Instead, until now, the UVA fixed term, which is the one that pays an income similar to the registered inflation from the 45 days before and 45 days after the deposit made, the profit offered by the interest of the other option has been lower, since the rise in the prices of the economy was lower since it was located around the 5% in the last few months.
At the same time, the fixed term UVA has as a condition the reserve of the money invested during a minimum period of 90 days.
Fixed term conditioned by inflation
Until now, the traditional fixed term has been the winning option, but the upward momentum of inflation is making the UVA version attractive. Therefore, some analysts consider that there is a possibility that this advantage will be “reverted” and that the instrument at a pre-established interest rate will no longer be the most profitable..
The different inflation expectations (optimistic, moderate and pessimistic) place fixed terms in a different position.
“During the past month, the domestic price rise finally exceeded expectations with which it counted in the two months ago. Undoubtedly, the rise in the prices of meat products, which was not so expected last December, but more tangible in the second half of last January, drove the rise of the National CPI above preliminary estimates”, warn iProfessional andres mendezdirector of AMF Economy.
That is, by taking as a reference the detail of the Buenos Aires CPIlast February there was a rise in 27% on the average prices of six beef cuts relieved.
“This and other factors introduced upward corrections in inflation expectations for February and the following months. For this reason, it is worth noting that these modifications have an impact on the expected returns on UVA fixed terms. They can even do so on the level of the rate interest rate of monetary policy set by the Central Bank”Mendez completes.
When comparing to different projections (optimistic, moderate and pessimistic), that vary according to a worsening or improvement in the economic situation, it is observed how the data can differ each month, with the consequent impact, or not, on the savings placed in a traditional fixed term or in a UVA.
In the case of the evolution of the national CPI expected for March, even the optimists anticipate a minimum price increase of 6% per month, a percentage that rises to almost 7% for the pessimists. Something that implies that the 6.2% per month of a traditional fixed term has the possibility of both being a winner or a loser depending on how that evolution really is.
“And this means that the UVA that will be applied between mid-April and a similar period of next May should be included in the indicated range, with a 50% chance of being located below above 6.30%“, says Mendez.
The traditional fixed term can be a winner or loser depending on which of the inflation expectations is met on a month-to-month basis.
Fixed term UVA versus traditional for the next few months
Meanwhile, although it is noted that as of April, the expectations of monthly price increases begin to decline, An overview can be drawn of the yields of the UVA fixed term in the next quarter and its current relationship with the minimum rate of return of fixed rate retail fixed terms.
According to what is observed in the table, “In April, the traditional fixed term, if the current rate of minimum returns is maintained, would lose with the UVA even in those cases in which more benevolent levels of growth of the UVA are contemplated. Even the most pessimistic estimates expect up to 6, 8% price increase in May”, details Mendez to iProfessional.
On the other hand, if progress is made in the quarter, in May and June the traditional fixed term would be repositioned as it would outperform the “moderate” forecasts of the economists, although not the most pessimistic.
“This means that according to the inflationary estimates made at the end of February, more than 50% of the estimates of the analysts on the evolution of the CPI are giving chances of traditional placements in the last two months of the second quarter of the year”, sums up Méndez.
Regarding the traditional fixed term, the doubts that arise are whether an upward inflationary inertia will force the Central Bank to raise the interest rate on 30-day deposits. Or, on the contrary, if the monetary entity will bet on the estimates of more than 50% of the economists surveyed in the Survey of Market Expectations (REM).
In other words, it is speculated that the BCRA will wait for the diffusion of the monthly CPI for April of the Indecto confirm the validity of the current yields of the traditional fixed term.
Added to this are the landslides that led the experts to correct your previous REM projections upwardssomething that indicates an upward trend in prices.
“In this case It would be appropriate to wonder if, as the pessimistic economists of the REM warn, the fate of the traditional fixed term is at stake and in the next quarter it will lose month after month with the adjustable UVA, something that should not escape the decisions of the Central Bank. . . . Not so much because of the result of the comparison between fixed terms, but because of the effects that a negative interest rate represents on consumption in real terms,” Mendez concludes to iProfesional.-
