Deposit yields continue their downward trend. On average, the most profitable 12-month vehicles available in Spain currently pay 2.20%almost one point less than a year ago (in January 2024 they gave 3.11%). The drop in salaries has occurred in a constant trickle since last June, when the European Central Bank (ECB) began the process of lowering rates. In 7 months, the institution has carried out four cuts, for 25 basis points each. And will continue to do so: Currently the market expects another 4 cuts this year, the first of them at the meeting on January 30. This implies that deposit yields will also continue to decline.
Even so, they are available on the market several 12-month deposits that allow us to beat inflation, which is expected to be 2.1% in 2025 in the Eurozone, according to Bloomberg. The most profitable vehicle is Banco Finantia, which offers an APR (Annual Equivalent Rate) of 2.95%for amounts, yes, of at least 50,000 euros. The digital bank follows WiZink, with your deposit at 2.60%for contributions from 5,000. And 2.52% pays the Ecuadorian Banco Pichinchastarting from 1 euro. These three vehicles beat the profitability of 12-month Treasury Bills, which currently stands at 2.36% in the secondary market.
Cetelem pays 2.30%, also from 1 euro, while Pibank (also part of the Pichincha group) pays 2.27%. For their part, Banco Big, Banca March and MyInvestor tieby offering all of them 2.25%, although with different conditions. The most affordable is the 12-month deposit from Banco Big, which can be purchased from 1,000 euros. The minimum contribution rises to 10,000 euros in the case of Banca March (which has lowered the remuneration from the previous 2.50%) and in that of My Investor. This last entity – the Andbank neobank – allows that 2.35% to be raised to 2.50% if the client also contracts automated portfolios for at least 150 euros.
MyInvestor has been in the news this last week by announcing a super deposit just one month at 3.5% APRwhich is available from 5,000 euros. If that minimum amount is hired, the remuneration would be around 15 euros.
Above the 2.1% inflation rate we still find the 1-year deposit from EBN Banco, which pays 2.20%. The rest of the products (those of Triodos Bank, BFF, Selfbank, Deutsche Bank and ING) are already below that level.
Alternatives for the saver
“In an environment of lower rates, It is logical that salaries have suffered this drop, although it is true that, if you have a deposit at the average profitability, at that 2.20%, you would be able to maintain your purchasing power,” says David Ardura, Investment Director of Finaccess Value. The problem is that current inflation estimates can change. “We have already seen how in the US these forecasts are rising due to the policies of the Trump Administration,” he adds. In Europe they can also rise, and this is a factor to take into account.
“Monetary funds, well managed, will always be a better alternative than a deposit”adds Ardura. For several reasons: “First of all, they move in short-term tranches, so they are not sensitive to rate increases; to this we must add the tax advantages they offer over deposits.” The fact that these products renew the portfolio in the very short term allows it to be adapted to possible changes that may occur in the rate scenario. Monetary is the “natural evolution” for the deposit client, who is not the same type of client as a fixed income client, due to his aversion to risk. These types of products, which are conceptually used to park liquidity, limit their investment to very short-term fixed income assets. It is the saver who, now that the deposit will pay him less, must assess whether he wants to take the step and become an investor, raising his risk threshold to aspire to returns that not only cover inflation.
For those who do want to make the leap towards investing in bonds, Ardura adds that it is a good time to extend the maturities: “We think it is a good idea to do so, with the investor being aware that they are going to suffer volatility; at this moment, it has already been recovered the slope of the curve and It already pays you to assume duration, whether in sovereign debt or corporate fixed income. Both slopes are very attractive,” explains.
In the United States, the market now barely foresees a rate cut this year, but the situation is very different in Europe, where cuts of 100 basis points are expected between now and the end of the year. Hence, the bonds to look at are the European ones. “The ECB’s interest rates are going to continue falling, which will also reduce the rates paid by the banks, and in addition, something very important to keep in mind is that the banks are very fast when it comes to passing on the cuts in interest rates. rates to the remunerations it offers to its clients,” comments Víctor Alvargonzález, founding partner of the independent financial advisory firm Nextep Finance. For those savers who have to renew their deposits, the alternative would be the European fixed income funds in the short and medium term, that is, two to three years, and with investment grade. The 2-year Spanish bond currently offers 2.4%, and 2.54% at 3 years; Italians are at 2.48% and 2.63%, respectively.
Regarding the quality of the bonds that are attractive to put in your portfolio, it is not necessary that they have the highest credit rating. In the European market there are options to go beyond sovereigns, always avoiding high yield, which for conservative profiles is completely ruled out. Another issue that Alvargonzález highlights is that in Europe “inflation is going to go down much more than in the United States; this is very important, because, in the end, the profitability of your real bond is also going to be attractive.”
Regarding the North American bond, which offers 4.57%Alvargonzález does not currently see an opportunity in it: “It is taking an unnecessary risk, in our opinion. In the United States there is a risk of inflation, due to the injection of steroids from Trump to the economy – in the form of tax cuts, less regulation – so that US bonds present a greater risk than European ones; the only advantage of Europe being stagnant and with very low growth, in eurosclerosisis that it is more difficult for inflation to rise here,” he points out.
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