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The "Key" has not reached its limit
By the end of the year, the Bank of Russia may raise interest rates to 22-23%, which is not ruled out by an increasing number of analysts. This scenario is supported by recent inflation data, as well as the statement of the regulator’s last board meeting, at which interest rates were immediately raised by 2 percentage points to 21%. In this situation, money market mutual funds investing in short-term financial instruments remain attractive.
A week ago, on October 25, the Bank of Russia raised the base interest rate by 200 basis points at once, to 21%, which was the highest figure for the entire observation period. Only six out of 30 analysts and economists polled by Reuters expected such a sharp increase, with the majority predicting a less aggressive increase to 20%. At the same time, the head of the regulator Elvira Nabiullina noted at a press conference that the council was also considering the option of raising the "core" above 21%. However, the forecast range of the average base interest rate until the end of the year has also been increased to 21.0-21.3%.
According to Moscow Exchange, on Monday, October 28, the RUSFAR indicator (calculated on the basis of one-day repo transactions with a clearing participation certificate) exceeded the level of 20% per annum and updated the historical maximum Wednesday. As of the end of February 2022, it reaches 20.46% per annum. On Friday, the index stabilized at 20.3%, which amounted to 1.83 p.p. compared to the end of the previous week and increased by more than 5 percentage points since the beginning of the year.
You can make money on the constant growth of interest rates using collective investment mechanisms such as mutual investment funds, which mainly use short-term reverse repo transactions and open-end money market mutual funds. According to Investfunds, investors have access to shares of 15 funds from 10 management companies. At the same time, 12 mutual funds make a profit from trading ruble instruments, and 3 mutual funds (from trading yuan). According to the results of the 9th month of 2024, the share price of the Ruble Money Market Fund increased by 12.0-12.8% compared to 5.7-5.9% for the same period in 2023. Senior analyst of Pervaya Management Company Natalia Vaschelyuk notes that as interest rates rise, the fund's profitability also increases, while for deposits, the profitability is maintained for the entire pre-agreed period, regardless of the dynamics of interest rates.
Investors are attracted by the liquidity of money market funds, as well as their high correlation between returns and benchmark interest rates. If BPIFs and open-end mutual funds are traded on a stock exchange, you can buy and sell them at any time during the business day without losing interest income, for example, if your deposits or withdrawals are closed early. Funds from a savings account. It is worth remembering that such investments are not subject to government guarantees, as is the case with deposits.
The management company also charges a fund management fee, which ranges from 0.1% to 1.0% for BPIFs and from 0.75% to 1.00% for public mutual funds. The administrator also bears the costs of maintaining the infrastructure, including, in particular, the fees of trustees and registrars, which rarely exceed 0.3% per annum.
Money market investments are used globally to temporarily place funds. This is because bond and stock yields are falling in the long term. Given the tough rhetoric of Russian banks, the relevance of Russian money market mutual funds will remain at least until the end of this year. Marina Nikishova, chief economist at Zenit Bank, draws attention to the latest inflation data. According to Rosstat, prices rose by 0.27% in the week from October 22 to 28, which was the largest weekly increase since the beginning of July. Annual inflation reached 8.6%. "Inflation in October may amount to about 10% for the year and 8.0-8.5% by the end of the year, which is twice the Central Bank's target of 4%," said Ms. Nikishova. Nikishova says:
At the same time, experts expect a further increase in the base interest rate by the end of the year. "The Bank of Russia's tough rhetoric indicates that rates are likely to rise to 23% in December," said Sergei Konygin, chief economist at the Sinara investment bank.
Marina Nikishova expects the key rate to increase by at least 22%. Rosbank is in no hurry to raise the forecast for the maximum level of the key rate above 21%, maintaining further tightening only in the risk scenario sector. In this case, we are considering an annual limit of 25%, which further worsens inflation. drawing. "The end of this year and the first half of 2025 will pass in the mode of the highest interest rates in history. This is due to the fact that, given high inflation and inflation expectations, it will take a long time for confidence to recover to the target level of 4%. Evgeny Koshelev, Director of Market Research and Strategy at Rosbank, said that the scenario of a gradual reduction in interest rates will manifest itself only in the second half of 2025.