Two of the main investment products for individuals, bank deposits and Treasury bills, are already significantly consolidating a decline in their profitability due to the expectation that the European Central Bank (ECB) will begin to lower interest rates. starting in June.
One-year deposits yielded 2.36% in February, according to data recently published by the Bank of Spain. It is the third consecutive month of decreases and an increasingly distant reference from the 2.6% reached in November, the highest rate since the ECB began to raise interest rates in mid-2022. The current profitability is below inflation, which stood at 3.2% in March.
The banks argue that until July 2022, with negative interest rates, they were remunerating deposits even if it was at a minimum. After the interest rate increases and despite the repayment of the emergency loans granted during the pandemic, the TLTROs, the entities have not had liquidity problems, which has allowed them to manage liabilities without the need to raise resources from individuals. .
So far this year, Spanish households have transferred nearly 28 billion euros from current accounts – demand deposits – to one-year deposits, according to data from the Bank of Spain. It is the highest pace since 2017 and it responds, according to reports from S
The Bank of Spain estimates that Spanish households now have 856,890 million euros in current accounts and 142,250 million in term deposits, when at the beginning of 2023 they had 928,375 million euros at sight and 65,473 million in term deposits. While they at least discreetly increase the profitability of their money, households now have the lowest debt since 2006, of about 452 billion.
Today the Treasury has placed 5,231 million euros in six and twelve month bills. Both modalities have also experienced a decrease in profitability, the first down to 3.6% and the second, up to 3.4%. That short-term time references give more performance than longer-term ones is another indication that the market is pricing in interest rate cuts. In any case, bills continue to outperform inflation in profitability.
These data are known two days before the April meeting on monetary policy of the ECB, in which no changes in interest rates are expected with respect to the current level of 4.5%. The forecast is that the decreases will begin from June, amid messages from Christine Lagarde of a path of inflation reduction as planned and signs of economic slowdown in the euro zone.
“The ECB is expected to maintain the status quo at its monetary policy meeting this Thursday, April 11, but should give some indication on a first cut in interest rates, which we estimate will be in June,” says Franck Dixmier of Allianz Global Investors.
Alexis Bienvenu, fund manager at Financière de l’Echiquier (LFDE), points out that Germany’s GDP will have experienced a new contraction in the first quarter, which is “another reason for the ECB not to delay cutting rates.” of interest”.
From Pimco, the forecast is that the ECB will maintain rates this Thursday and maintain a “data-dependent” approach, in line with the “base hypothesis of a rate cut in June.”
