Money market rates traded higher across the curve during March with the biggest move in the 6 month and 12 month area on the yield curve (respectively 15 basis points to 30 basis points).The 3 months rate moved 5 basis points higher to 7.45% while the 9 months remained unchanged at 7.30% due to its maturity profile that will be in December 2005.

The three month NCD's currently at 7.45% traded mostly sideways through the fourth quarter. The SARB decided too keep the Repo rate unchanged at 7.50% during the December MPC meeting. One year NCD traded in a narrow band between 7.45% and 7.25% during the quarter. At the end of the fourth quarter the money market yield curve suggested some room for monetary easing in the short term, but it also factored in 1% of monetary tightening within the next two years. Money market investors therefore appear to be of the opinion that short term interest rates are at, or very close to, the bottom and that interest rates would mostly drift sideways too higher from here. SIM did not expect any monetary easing during the December meeting and therefore invested in the short end of the money market. We expect monetary policy to remain unchanged over the short term although the risk is that the SARB could cut interest rates with another 50 basis points at the next MPC meeting taking place in February 2005.