The ground rules of smart investing say that when a declining rate trend is about to start, it is profitable for money to be moved to fixed-rate instruments. These instruments provide constant gains, which go up in relative terms as the market's current interest rates go down.
The delayed economic restructuring, which has maintained pressure on the inflation rate and the foreign deficit, did produce one gain: savings in ROL, at fixed interest rates and longer maturities, have turned out to be the safest investment. Should more predictable circumstances start to prevail, the Romanian market will no longer see fixed rates of 17% a year, for instance.
Unfortunately, maturities longer than one year at fixed rates are hard to find, with the Romanian State itself unable to place bonds maturing in two years.
It is certain that rates will start dropping soon. The National Bank again tackled the issue in yesterday's Board meeting, and is expected to make an announcement shortly. However, the declining trend should not be prompted by political pressure, but by the ability to maintain a set course, without going back to the old parameters as happened last year.
There is no abundance of fixed rate instruments on the Romanian market. The list starts with certificates of deposit and T-bills and ends with the traditional deposits, but doesn't include those which stipulate a variable rate clause, which many banks are trying to push. The gains yielded by fixed rates are very likely to exceed the gains provided by deposits that are being periodically renewed at decreasing rates.
Especially in the case of T-bills, but also for certificates of deposit, the profit secured by an investment made at this time is rather significant, as it guarantees a 16%-18% interest rate for one or even two years. It is worth noting that the rates will keep decreasing during this period, as the prognosis on inflation envisages a 9% rate for the end of December 2004 and 6% for late December 2005. And since deposit rates will certainly not remain at twice the inflation rate (as happens with credits), this is a sure and easy way to make money.
Some have already tapped into this income source, with the banking market having logged numerous cases when foreign currency deposits were converted into ROL deposits.
Whoever goes to the bank today and purchases certificates of deposits with a fixed rate of 18% a year can secure the same profit level for the next twelve months, while the market's current rate will certainly go down, especially towards the end of the year.
Should crediting costs drop, the banks will also cut the deposit rates, as they hurriedly did last year, until the National Bank of Romania had to intervene in order to put an end to the accelerated drop in savings.
Average rates for ROL deposits opened by natural persons, maturing between one month and one year surged in March, up to 14.3%, a record-high for the past year. The average interest rate slumped to an all-time low of 11.7% in June 2003, hardly leaving much hope for a revival.
razvan.voican@zf.ro
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
