Life insurance: a sharp rise in interest rates on government bonds and returns on euro money will rise!

Life insurance: a sharp rise in interest rates on government bonds and returns on euro money will rise!

If some people give euro money to the dead, with this paradigm shift, this getting the financial world back on its feet (positive interest rates), euro money returns should start to rise again, starting in 2022. If rates of return on savings-free started The risks are already on the rise (A book of accounts, LEP, term accounts, bank books), and the rise is still not noticeable.

An astonishing rise in the price of government bonds

You can’t miss it, because if the topic of France’s massive debt worries the financial media once again, it’s a contradictory sign of good news for savers. In fact, the majority of the financial savings of the French are invested precisely in the country’s debt. Funds in euros, and therefore French insurance companies, are the first clients of government bonds in the country, and they underwrite up to 40% of the national debt.

OAT Evolution Rate (TEC10) © FranceTransactions.com

It is difficult to accept when rates are negative, some have already seen the death of money in euros. But the best financial advisors are those who don’t bet on the future. In recent days, the interest rate hike has been staggering. Admittedly, these are just market interest rates, the 10-year oat rate, and not yet new bond issues.

Do not break bonds to holders of bond lines until maturity

When interest rates rise, the price of fixed rate bonds falls. Only the investors who apply the strategy of valuing their lines, and do not hold their subscribed bonds to maturity, find themselves in turmoil. Euro fund managers use the strategy of carrying bonds at maturity. Thus, this bond crash is not about Euro funds, as long as savers don’t come in large numbers asking to redeem their contracts.

New bond issues, vouchers up sharply

As you know, a Euro fund portfolio manager subscribes to bonds in order to hold them to maturity. A fall in bond prices when interest rates rise, as it currently does, does not affect money in euros. On the other hand, what managers examine are new bond issues with yield rates

  • French state debt not linked to inflation : Bond issuance by France Tresor (AFT) has not yet reached that level of 2% and more, but that’s just weeks away. With the announced increase in the key interest rates of the European Central Bank, there is a general upward movement in all financial rates. Whether it is mortgages, or risk-free savings rates, or even those of private bond issues, and therefore even those of government bonds.
  • Inflation-related bonds (OATi) Insurers can also benefit from inflation-linked government bond issuances. Previous bond issues whose yield rates are currently close to 6%. Thus, the next issues of OAT € i that will take place in mid-June will offer, for example, a maturity of 25/07/2027 showing a rate of 1.85%, or even 1.80% over an investment horizon up to 2024..
  • Private Bond Issues : Nominal rates for corporate bonds are rising sharply. The rates of return offered are sometimes very attractive (7% and more), but the stakes are clearly high. Funds in Euros will be invested very little in these high-risk special issues.

No excitement for euro money returns…

© AFT

Good news, but not a sudden change. The more euro assets the fund has, the longer its bond lines will be renewed. Suffice it to say that the dying Euro funds of 2021 will take a few years to change course and will not be the champion of return as early as 2023. On the other hand, the more nimble Euro funds should see their yields rise very quickly, given that these funds will offer the new issue bonds a higher risk ratio / A much higher return than those available in 2021. On the other hand, dynamic Euro funds, a marketing term to denote exposure to risky financial markets, will be the biggest losers in 2022, after this purge of stock market indices. Not surprisingly, the bursting of the financial bubble after these years of flooding financial markets with liquidity is healthy in the long run.

📧 Get every day, from 9 am, the information that matters to your savings

Email savings news, new offers, new savings investments daily, changes in interest rates, new installments, key dates not to be missed…tax and real estate news.

No ads, no spam, no use of your email address other than this daily email being sent to you. You can unsubscribe directly to each email via the link at the bottom of the email page.

Leave a Comment

Your email address will not be published. Required fields are marked *