Fixed Rate RSA Retail Savings Bonds
|Fixed Rate RSA Retail Savings Bond Term||Rate % (Aug-19)||Month Change %|
At first, July 2019 saw a stronger Rand and rallying Government Bond yields. The SARB lowered the repo rate by 0.25% to 6.50%, with subsequent local credit and global interest rate moves affecting the Rand and SA Bond yields negatively.
During the month, short and medium term benchmark yields increased by approximately 0.3% with long term yields rising by over 0.2%.
Given these Government Bond yield changes and general market conditions, 2 and 3-year RSA Retail Savings Bond rates have remained unchanged, while the 5-year rate has increased by 0.25% for the month of August 2019.
RSB rates remain in line with Bank rates.
Rate Commentary for July 2019
Last updated 1 August 2019
July 2019 saw the SARB lower the repo rate by 0.25%. The Rand ended weaker and yields higher following local growth and credit concerns as well as international interest rate changes. RSB Rates higher by 0.25% for 5-year term, other terms unchanged.
The monthly change in underlying Government Bond yields is a good proxy, for any RSB rate changes, however the spread added to Government Bond yields to arrive at RSB rates can adjust to retail market conditions. RSB rates remain competitive compared to the Banks.
As depicted in the 5-year Retail Savings Bond Rate versus 5-year Government Bond Rate Chart, the increase in the 5-year rate with subsequent increase in the RSB rate means the spread over Government bonds is now at average levels for August 2019.
The lack of changes to the 2 and 3-year RSB rates means their spread over Government Bonds has now reverted to below the average.
Investment rates for new bonds are set by the National Treasury at the start of each month, and are primarily determined based on the levels at which Government Bonds are trading in the capital markets. By keeping an eye how these bond levels have changed over the month, it is possible to get a good idea what changes, if any can be expected in RSB levels. This information is useful in determining whether to buy or re-start now, or hold off in the hope of better levels next month.
For those interested in more detail in the moves of the RSB bonds relative to Government bonds, more detail is below
How do the RSA Retail Bonds rates compare to Bank Deposit rates?
Last updated 2 June 2019
Retail Banks are paying competitive rates compared to RSBs for the same term. Given that the RSBs are:
a better credit
can be re-started should rates go higher, and
for the over 60’s can be redeemed reasonably cheaply,
means that they certainly offer great value relative to bank term deposits.
Recently however, the large banks are paying higher nominal rates that RSBs, with tight competition, specifically in the 5-year term.
For those able to access these top rates (typically you need to be 60+ and have R100,000 to invest), bank deposits are still worth considering as part of a savings portfolio.
The significant value associated with the re-start option however, means that we continue to favour a larger holding of RSB relative to term bank deposits.
|Bank||Last rate refresh date|
|ABSA||29 May 2019|
|FNB||7 May 2019|
|Nedbank||29 May 2019|
|Standard Bank||28 Nov 2018|
|RSA Retail Bonds||1 June 2019|
At this stage, we only compare the “Big 4 SA Banks” retail rates given their credit quality is closest to RSA Retail Savings Bonds. Over time we may look to add the other banks. Refer to Insight
The latest published rates are used, where we find each bank’s top product offering by investment term for an investment of R100,000 by a 60+ year old investor. This view of banks’ top rates provides a good overall guide to SA bank rates, their differences and trends.
It is interesting that for competitive reasons the Banks always pay very much the same rates in the wholesale markets. In the retail market however, the rates can be materially different – so keep an eye on what is available and negotiate your rate!
South African Government Bonds
Fixed Rate RSA Retail Savings Bond rates are primarily set off and affected by the yields of Fixed Rate South African Government Bonds traded on capital markets. General market conditions also affect the final Retail Savings Bond rate offered.
As at 31 July 2019, Government Bond Rates were as follows:
|Bond Name||Term to Maturity (Years)||Yield %|
Interpolating the rates as at 31 July 2019, we obtain 2, 3 and 5-year Government Bond Rates
|Interpolated Term (Years)||Interpolated Yield %|