The money market had a volatile month during October. Comments from Tito over concerns of the higher oil price led the market to move from pricing in a 90% chance of a 0.50% cut in interest rates, to pricing in no cut at all for the October Monetary Policy Committee (MPC) meeting. 12mth NCD's moved up 0.35% to peak at 7.85% before ending the month lower at 7.55%. As expected the SARB kept rates on hold during the month, accompanied by a relatively balanced MPC statement. However, towards the end of the month, once again, the market became optimistic on interest rates, pricing in an 80% chance of a 0.50% cut in interest rates at the February MPC meeting.

Going forward, we continue to expect inflation to remain comfortably within the 3-6% target band and for interest rates to remain stable over the next 12 months. As such, we believe that the market is starting to run ahead of itself once more and is now looking expensive. We will continue to look for opportunities to reduce duration into strength.

The money market curve continued to rally during September as the market remained optimistic on interest rates. Better then expected inflation data released during the month (the lowest ever recording of inflation at 3.7%) continued to support the market's expectation for further interest rate cuts. Towards the end of the month, the market was pricing in a 90% chance of a 0.50% cut in interest rates at the October Monetary Policy Committee (MPC) meeting. Some yield curve flattening was also evident as the long end led the rally, falling 0.25% and the short end fell 0.15% during the month.

Your fund remains long the benchmark and was well positioned for the rally. We believe the market has run ahead of itself and is now starting to look expensive. The long end of the curve is now offering little value. Going forward, we continue to expect inflation to remain within the 3-6% target band and for interest rates to remain stable for longer.

The long end of the money market curve continued its steepening bias into June, with the long end rising 0.15% to peak at 9.05% mid June. However, a stronger Rand and better than expected inflation figures caused the 12mth NCD's to fall back to end the month at 8.90%. Going forward, we expect domestic inflation to remain within the 3-6% inflation target band on the back of a stronger Rand, lower oil price and better then expected food data.

Your fund was well positioned for the month as we lengthened the duration of your portfolio and locked into higher yields in the long end of the money market curve.

Despite a strengthening Rand, the long end of the money market curve continued to rise and steepen during May with the 12 month NCDs rising 0.10% and 3 month NCDs remaining flat during the month. The market focused instead on the risks in the global environment with the long end of the cash curve pricing in more interest rate hikes further out.

Going forward, we expect domestic inflation to exceed the upper end of the inflation band in response to higher oil prices and the unwind of last year's favourable base effects. However, with the market pricing in rate hikes in excess of 3.5% over the next two years, we feel that cash yields offer value in the long end of the curve. We continue to look for opportunities to buy into weakness.

The long end of the money market curve continued to rise during April on the back of a weaker Rand and a deteriorating international backdrop. As a result, the 12-mth NCD rose 0.20% during the month as the market started to price in further interest rate hikes. Some yield curve steepening was evident as the short end, awash with liquidity, rallied 0.05%.

Going forward, domestic inflation is expected to continue rising to the upper end of the inflation target band and we expect official interest rates to start rising before the end of the year. We believe that the long end of the market is now pricing in a fair amount in interest rate hikes. However, we remain cautious on money market yields in the light of a nervous international environment, but will look for opportunities to buy into weakness.

The money market curve sold-off during the month of December as the SARB once again surprised the market by cutting rates less than anticipated. A 0.50% cut versus a 1% market expectation. This caused the money market curve to steepen with 12mth NCD's rising 0.90% to yield 8.05% and 3mth NCD's rising 0.30% to yield 7.65%. The fund was positioned only slightly long the benchmark and as such was reasonably positioned for the move.

Going forward, we believe that there is not much room for rates to move lower. We are at or close to the bottom of the interest rate cycle with the market pricing in a small probability of a rate cut in February.

Further out, we remain more cautious on money market rates as inflation and interest rates look set to rise and we will look for opportunities to shorten the duration of the fund.