If there is an index that worries Spaniards, it is the Euribor. And not only the Spaniards who have mortgages are watching the Euribor's every move. Investors are also watching its ups and downs.
Mortgage owners have rejoiced in the Euribor's performance during the past few months (since October it has done nothing but fall to yesterday's low of 1.57%) considering that the fall in the index corresponds with lower mortgage payments. But the Euribor's decline is not all good news for investors.
According to data from Morningstar, in Spain there are more than 500 funds that link their yield to the development of Euribor one, three or twelve-month notes or to the Eonia. Around 130 of these are Spanish products that track assets under management (AUM) worth 13.5 billion euros, or 10% of all the shares in the industry in Spain.
And these funds, in an environment of low interest rates and a declining Euribor, are losing value. These 150 funds do not include guaranteed funds and many fixed income funds also link their yield to the Euribor.
"Near-term fixed income and money market funds are the hardest hit because they have to offer yields that are tied to near-term interest rates," said Ricardo Sánchez Seco, a fund analyst from Gestiohna. Further, manager commissions have to be taken from these scanty gains. On average commission are 0.59% for money market fund and 0.79% for near-term fixed income.
