Fixed Rate RSA Retail Savings Bonds
|Fixed Rate RSA Retail Savings Bond Term||Rate % Mar-20||Month Change %|
February saw the Rand weaken by more than 6%, with USDZAR closing the globally turbulent month at 15.66. Despite this, short and medium term Government Bond yields continued their moves lower, with the yield curve steepening aggressively.
The shorter term benchmark Government Bond yields decreased by over 0.13%, while the 5-year rate was static and longer term rates higher.
Given these Government Bond yield changes and general market conditions, the 2 and 3-year RSA Retail Savings Bond rates have decreased by 0.25%, while the 5-year rate has remained constant for the month of March 2020.
RSB rates remain in line with Bank rates.
Rate Commentary for February 2020
Last updated 1 March 2020
February 2020 saw the Rand close still weaker than January. Government bond yields did not follow suit, with a material drop in shorter term yields and a steepening yield curve. RSB rates are lower by 0.25% for 2 and 3-year terms and unchanged for the 5-year.
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 near static 5-year rate with no change in the RSB rate means the spread over Government bonds remains at average levels for March 2020.
The 2 and 3-year RSB rates’ spread over Government Bonds remain below their 12-month average spread.
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 1 February 2020
Retail Banks are paying competitive rates compared to RSBs for the shorter terms, with RSBs paying the average rate in the 5-year.
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.
Since the SARB repo rate cut in January 2020, the short end of the Government Bond yield curve has dropped materially . As a result the current RSB curve shows better relative value in the longer end, with some good value shown by banks for shorter terms.
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||28 Jan 2020|
|FNB||20 Jan 2020|
|Nedbank||22 Jan 2020|
|Standard Bank||22 Jan 2020|
|RSA Retail Bonds||1 Feb 2020|
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 29 February 2020, Government Bond Rates were as follows:
|Bond Name||Term to Maturity (Years)||Yield %|
Interpolating the rates as at 29 February 2020, we obtain 2, 3 and 5-year Government Bond Rates
|Interpolated Term (Years)||Interpolated Yield %|
SA Government Bond yields reverting to longer term downward trend. Curve steepening, with short rates falling strongly
For more detailed month-to-date South African Government Bond Yield information and RSB predictions see http://rbond.co.za