Fixed Rate RSA Retail Savings Bonds
|Fixed Rate RSA Retail Savings Bond Term||Rate % Jan-21||Month Change %|
December held yet further volatile moves for the Rand and bond yields. The Rand ended the year firmer by just over 5%, with USDZAR closing at 14.69. Government Bond yields twisted across the curve with the short end rising 0.14% and longer dated bond yields falling 0.23% meaning the curve flattened materially.
Given these Government Bond yield changes and general market conditions, the 2-year Fixed RSA Retail Savings Bond rate has risen 0.5%, the 3-year remained static and the 5-year Fixed RSA Retail Savings Bond has dropped 0.5% for the month of January 2021.
RSB rates remain in line with Bank rates.
Rate Commentary for November 2020
Last updated 1 December 2020
Further ratings downgrades, no SARB rate cut in November, geopolitical risk and fiscal concerns continue to cause major moves in the local fixed income market.
Retail Bonds still offer substantial value over Government Bond yields, however, spreads are tighter and materially lower than the March spike
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 0.14% change in the 5-year rate with no change in the RSB rate means the spread over Government bonds tightened for December 2020.
The 2 and 3-year RSB rate spread over Government Bonds narrowed to their long term average spreads too.
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 September 2020
Most Retail Banks are paying less competitive rates compared to RSBs, particularly for longer term fixed deposits.
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 several and still expected SARB repo rate cuts this year, 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 some banks for the very short 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||1 Sep 2020|
|FNB||17 Aug 2020|
|Nedbank||1 Sep 2020|
|Standard Bank||1 Sep 2020|
|RSA Retail Bonds||1 Sep 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 30 November 2020, Government Bond Rates were as follows:
|Bond Name||Term to Maturity (Years)||Yield %|
Interpolating the rates as at 30 November 2020, we obtain 2, 3 and 5-year Government Bond Rates
|Interpolated Term (Years)||Interpolated Yield %|