What Does DTF Percentage Mean?

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The 90-day benchmark DTF rate is calculated via the weighted average of certificate of deposit rates offered by Columbian banks.
The 90-day benchmark DTF rate is calculated via the weighted average of certificate of deposit rates offered by Columbian banks. (Image: wrangel/iStock/Getty Images)

Fixed term deposits, or "depositos termino fijo" in Spanish, is the main benchmark interest rate set by Colombia's central bank, Banco de la Republica. Interest rates are expressed as percentages, so the DTF percentage is the interest you can expect to receive on fixed term deposits held at a Colombian bank. The 90-day DTF rate is the most commonly used benchmark. It is used as a basis for establishing interest rates on other financial instruments issued by Colombian financial institutions.

The Banco de la Republica, or Central Bank of Columbia, uses interest rates to set its national monetary policy. The rate is a fixed rate, and Colombia has a history of promoting economic stability by leaving the DTF rate unchanged over time. The Colombian economy is less of a free market economy than the United States, and you should be cautious in using DTF rates as a proxy for risk and return characteristics of any potential investments in Columbia. This is because the Colombian government more regularly interferes in the various sectors of the Colombian economy, especially financial sectors such as banking. For example, instead of allowing factors related to supply and demand to set market prices for commodities and goods, the Colombian government often arbitrarily sets fixed prices. This is usually done by subsidizing consumer purchases as a political tactic to please voters. This type of interference is why you should hesitate to use the DTF rate as a true measure of risk. The rate doesn't reflect genuine consumer and investor expectations with respect to risk. Returns can't be modeled as in free markets, because regulatory interference renders models useless.

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