BTP or term deposit? Here’s what’s worth it
Between government bonds and deposit accounts, today there are many alternatives to better manage liquidity. All with very competitive returns, Depending on the duration of the investment, it can total up to 7%. (This is the case for Smart Bank’s 20-year fixed deposit). But between Bot, BTP Valore, BTP Italia, regular BTP and deposit account, which is the most convenient? In fact there is no single answer. Investing based solely on returns can be counterproductive in the long run. In fact, sudden liquidity needs can affect investment success. In addition to performance, the elements to consider to make the best choice vary: from personal needs to the goals you want to achieve, to the reference time horizon. “Always keeping in mind the basic principle of every portfolio: diversification — explains Francesco Castelli, Director of Credit Strategy at Banor —. Let’s not forget that liquidity is only one part of asset allocation.”
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Between drinks and in the long run
But just by conducting a performance analysis exercise, on Short-term time horizon, deposit account compared to government bonds, defeated with bot Which today yields a gross of 3.96%, equivalent to a net yield of 3.45%. “What works in favor of the Italian zero coupon is the difference in taxes, which are 12.50% for robots and 26% for the deposit account – Castelli points out. This means that, with a bot earning a return of 3.45% (about 3.35% net of transaction costs), the deposit would have to give a return of at least 4.5% to break even.” So far, Cherry Bank and Banca AideXa (which just… (updates its offer) and Banca Cf+ competitive rate for 12 months, equal to 5% (net 3.7%), 4.75% (net 3.52%) and 4.5% (net 3.33%). Even in the long run, according to Castelli, the balance should tip in favor of government bondswhich offer returns that are practically in line with those of term deposits of the same maturity, but with an additional “advantage”: that If necessary, bonds can be sold in the secondary market. However, with a restricted account, liquidity is blocked for the duration of the contract. In some cases it can be released, but by paying a penalty, which generally corresponds to the loss of additional profits obtained compared to the interest rate applied to the free deposit.
Deposit account option
But those who have the possibility of blocking their capital for a medium to long period of time can do so as well Consider the term deposit option. In recent months, the market has updated the active rates offered to clients and over 5 years they also reach 5.4% gross (4% net), as in Cherry Bank (also offering the same interest for 4 and 3 years). Private bank leasing is also competitive, with a total payment of 5% for 60 months. Just like Smart Bank (but with a variable rate structure: starting at 4% in the first year and reaching 6% in the last year), which in September also launched an offer over a longer time horizon of 10, 15 and 20 years, with rates of 5%, 6% and 7%. % respectively.
Btp Valore hash power
in Long-term average time horizon, between Btp value (for retail) and regular BTP bonds, the winner in the comparison in terms of yield is the former, with the latter offering a 5-year maturity yield of 4.41% including loyalty premium (0.5%, payable only to those who subscribed to BTP Valore during the issuance phase And keep it until the due date.) BTP’s latest 5-year regular version currently offers a yield of 4.28 percent. “But there are also other elements in favor of BTP Valore, such as the absence of trading commissions – says Castelli -. Furthermore, it has a coupon distribution on a quarterly basis (BTP’s regular distribution is semi-annual, ed.), which can be convenient for a retail investor at this specific market moment.
BTP Italy disappointment
they Disappointing, but BTP ItalyItalian inflation-linked government bonds, With semi-annual coupons Who, after a very rich year of over 10%, are returning to the ranks. For example, the last issue due in March 2028 paid a semi-annual coupon totaling just 1.34% in September (net of 1.17% of the 12.50% withholding tax). Given that market expectations point to a decline in inflation towards the ECB target of 2% (record in September +5.3% versus 5.5% in the previous month and a peak of 11.6% in December 2022), later coupons could reduce further. “The growth in the CPI that characterized 2022 generated a context of enormous interest for BTP Italia and the misconception began to spread among investors that the 10% coupon could last forever – Castelli points out -. However, inflation has peaked and is now on its way back. “We cannot know for sure where it will go, but its return towards the 2% target will certainly not be a bonus for BTP Italia.”
With the 10th anniversary of surpassing “pregnancy”
Government bonds today can be An opportunity also from a speculative point of view, not just “carry” (the offered return), when prices start to fall. If the goal we set for ourselves is specifically to only benefit from potential capital gains, we should look at longer maturity periods, such as the ten-year period, which in recent days has reached a record high of 5% in terms of performance. (This has not happened since 2012). Title Interestingly, the BTP expires in March 2034 which pays a coupon of 4.2%. Which stock is currently below par at 94.42. Or a 10-year bond expiring in November 2033 with a coupon of 4.35% and a market rating of 96.
Standing still does no good
In any case, whether you invest in a BOT, BTP or deposit account, the important thing is not to leave money accumulating in the current account. Inaction will not work, especially in a context where inflation remains at high levels. To give a practical example, in 2023 alone, inflation has cost Italians around €90 billion. The 1.850 billion euros that, according to Abe data, were held at the beginning of the year in current accounts, redeemable deposits and repurchase agreements, have lost a lot in terms of purchasing power. This is a “gap” that widens even more if we also take the year 2022 into account. With the inflation rate reaching 12.25% in the past twenty months (from January 2022 to the end of August 2023), in fact, the value of the capital tied up in the accounts decreased by 12.25%. About 230 billion. In short, in light of high prices, standing on the current account is certainly not the best solution.
Minimum interest rates on current accounts
On the other hand, the interest income paid by unrestricted Italian current accounts is among the lowest in Europe. This is despite the fact that, since June 2022 until today, the European Central Bank has raised the interest rate on deposits to 4 percent. According to the latest Abe data for August 2023, The average interest rate charged by banks on deposits in current accounts alone is 0.4 percent. This means that, facing average inflation of 7.6% in 2023, Italians had to deal with a negative real rate (net inflation). To obtain interest more in line with that obtained by the European Central Bank, it is necessary to shift interest to other instruments, such as certificates of deposit or time deposits, which pay an average interest of 3.36%.
The situation in Europe
But in other European countries, interest rates are higher, and in the UK even higher than the ECB (5.25% versus the ECB deposit rate of 4%). «In Europe, banks have become more dynamic and competitive in offering more favorable compensation for liquidity – he emphasizes Andrea Rocchetti, Global Head of Investment Advisory at Moneyfarm -. For current accounts without restrictions, the average interest paid in the Old Continent is 3.11% (source Moneyfacts), with a peak of 5%. But in Italy, flexibility is limited to loan interest rates,” which last year rose to an average of 4.48% (2.32% in August 2022).
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