Fixed Rate RSA Retail Savings Bonds
|Fixed Rate RSA Retail Savings Bond Term||Rate % (Nov-19)||Month Change %|
October saw the Rand initially strengthen and Government Bonds trend lower leading into the medium-term-budget-speech at the end of the month. The last few days of October saw all currency gains and yield reductions reversed with metrics all weaker on the final trading day of the month.
During the month, all 2, 3 and 5-year term benchmark yields increased by between 0.1% and 0.15%.
Despite these Government Bond yield changes and general market conditions, all 2, 3 and 5-year RSA Retail Savings Bond rates have decreased by 0.25% for the month of November 2019.
RSB rates remain in line with Bank rates.
Rate Commentary for October 2019
Last updated 1 November 2019
October 2019 saw the Rand close above 15 to the dollar, despite strengthening for most of the month. Government bond yields followed suit with a significant spike in yields to end the trading month. RSB rates are lower by 0.25% for all fixed rate terms.
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 net increase in the 5-year rate with subsequent decrease in the RSB rate means the spread over Government bonds is now well below average levels for November 2019.
The 2 and 3-year RSB rates’ spread over Government Bonds are now similarly 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 October 2019
Retail Banks are paying competitive rates compared to RSBs for the shorter terms, with RSBs paying the highest 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 earlier in the year, the large banks have aggressively reduced rates. As a result the current RSB curve shows particularly good relative value.
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||18 Sep 2019|
|FNB||19 Jul 2019|
|Nedbank||6 Sep 2019|
|Standard Bank||25 Jul 2019|
|RSA Retail Bonds||1 Oct 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 October 2019, Government Bond Rates were as follows:
|Bond Name||Term to Maturity (Years)||Yield %|
Interpolating the rates as at 31 October 2019, we obtain 2, 3 and 5-year Government Bond Rates
|Interpolated Term (Years)||Interpolated Yield %|