Is it worth investing your savings if keeping them in your account today yields 4%?


This is the question of the year and perhaps of the years to come.

Faced with a profit of between 3% and 5% (depending on the country you live in) with virtually no risk, deposits are obviously attractive. But what you should really be wondering is how long rates will stay this high.

“Cash offers high rates in the short term, but these returns are unlikely to remain so for, say, the next 5-10 years. Buying bonds, on the other hand, allows you to obtain similar rates for a much longer period. Keeping money in a savings account would therefore mean giving up the opportunity to lock in these levels of return in the long term (with a slightly higher risk). In fact, buying bonds now can be particularly profitable, especially if a cut in interest rates is expected and /or a recession” explains Julien Houdain, head of global unconstrained fixed income at Schroders

There are also other ways, worth considering, to take advantage of the bond market, particularly on shorter maturities, such as 3-4 years. For example, on short-term credit, we now have access to returns close to 7% in dollars. You must be willing to tolerate a little risk, but these are still high quality securities and the investment, in this case, will be less influenced by the trajectory of interest rates.

“In reality, it’s not just about liquidity. Looking in particular at the Italian market, here we are investing directly in BTPs, also thanks to the tax incentive that supports this type of purchase. With this allocation, however, we tend to lose the benefit of diversification. A well-diversified investment portfolio can lower potential risk and increase returns. Right now it is possible to build a high-yield bond portfolio, taking advantage of what we think could be a cyclical opportunity, given that the economy is facing difficulties.There are many ways to increase the yield of a bond portfolio – for example, at the moment we see how European covered bonds, which are issued by banks and have high ratings, offer a significant premium on the market” continues the Schroders expert.

Another question to ask is how long will it take before higher rates penalize those who get into debt? The fact that, for now, higher financing costs have not weakened the global economy has surprised the market. At the moment, we see two scenarios. In the United States, most corporate financing occurs through the bond market. This means that US companies were able to secure very low rates in 2021 with relatively long maturities. So companies will not have to worry about refinancing at higher costs for some time to come and this explains how the impact of the rise in rates on company debt has been relatively limited to date. Likewise, the impact has been minimal on US families – who typically secure fixed rates on 30-year mortgages – and are, therefore, still benefiting from low rates.

Elsewhere, however, the story is different. “In the UK, where mortgage maturities are much closer together, families have had to refinance at much higher rates. If they haven’t already done so, those families who got into debt with rates at very low levels in 2019 and 2021, will have to refinance very soon. In the Eurozone the problem is more limited on the mortgage front, but vice versa exists for companies, because most of the credit is bank and at variable rates. This means that companies in the Eurozone are very much affected by more than the rise in interest rates and this is already filtering into macroeconomic data, with the euro zone suffering. By comparison, the US economy is doing much better because companies and families have been relatively immune to the rise in interest rates for now ” continues Houdain.

Finally, it is worth asking whether long-term yields could rise further. Considering the movements we have seen in the last two months, it is difficult to answer “no” to this question. If you look at the macroeconomic data, it is clear that the resilience in the United States has been impressive.

The key point concerns the level of excess savings accumulated during the Covid period.

This article is originally published on



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