Fixed non-fixed income: the odds threat

The loss of money invested in fixed income funds due to the economic situation surprised many investors. They actually lived in 2022 worst year in history. According to the research director of the Inverco Observatory, the decline in its profitability averaged 8% during that year. José Luis Manrique. They also fell, with the stock market only three times since 1950. And that’s no less bad if you take into account that the Spaniards have 101,000 million euros in these funds, most of them long-term. For this reason,Why do they have losses? Is it that attractive when investing in fixed income bonds?

In these extraordinary circumstances, false belief thinking that investing in fixed income is doing it risk-free. “It’s believed to have a steady payoff, but in reality it’s just a quibble,” says AEPF vice president Javier Santacruz.

The main reason for the decline in prices is that the central banks, which continue to rise in interest rates, tightened their monetary policies to limit inflation. On March 16, the European Central Bank (ECB) made the final increase for the sixth time in a row, up to 3.5%, after a ten-year exception with negative rates. This directly affects the benefit that can be obtained from bonds invested before the rise.

adria morronAn economist at CaixaBank Research explains that this is due to an inverse relationship between the price of a bond and its interest rate, which means that when rates rise, the price of bonds falls and those who hold in their portfolios lose. value. “This is because bonds with the same characteristics can be issued at a better rate to those that have already been issued, causing the price of the already existing ones to fall,” says an investment expert from one of Spain’s leading banks. But these effects on bond funds did not stop investment. They experienced an almost percentage increase last year. 6,000 million euros invested.

In short, fixed income is not fixed, but Treasury bills are an exception. The higher the odds, the more profit you get. These also delight investors with returns of over 3%.

take the losses

According to experts, the best performing funds during these times are Spanish and Italian public debt bonds and corporate debt bonds with the highest credit quality. “So do dollar-related funds,” he says. Victor Alvargonzalezspecialist at independent financial consulting firm Nextep Finance.

However, the increase in rates does not affect new participants, on the contrary. “Those who take advantage of the rate hike to buy fixed-income funds will be the ones who will see a more positive return because the losses will gradually be recouped.” manrique. Indeed, in the first two months of the year 0.3% recovery this profitability.

opportunity to kick back

Related news

Experts point out that it is predictable that a monetary correction will come at some point as a result of years of negative interest rates, but what cannot be calculated is virulence. For those who do not see this coming, it is recommended that they seek advice from advisors and wait for losses to be recouped without giving up their positions. “When all the losses have already occurred going out is never a good ideabecause the opportunity to rebound was lost,” adds Santacruz.

Rodrigo BuenaventuraThe head of the National Securities Market Commission (CNMV) warned this month that “the price of fixed-income instruments is not fixed, and even long-term products are not fixed, however much it may seem to inexperienced investors.” and at a time when there is an expectation of an increase in interest rate curves”.