Money market yields during September traded in a narrow range between 12.05% and 12.15% while the 12 month Jibar rate came down from 12.70% to 12.55%.The decrease in the 12 month yields was due to the expectation that the Reserve Bank will keep the Repo rate unchanged at 12% while the market expects the top in the inflation cycle within the next few months. Looking forward the next MPC meeting will take place on the on the 9th of October Expectations is that the MPC will keep the Repo rate unchanged at 12%. Short dated forward rates in the money market discounts an unchanged Repo rate in the near term whilst the longer dated forward rates suggest that the Repo rate could come down in the next year. During the month major maturities were invested in the 3 month and 12 month area of the yield curve. Longer term assets were included in the fund to take advantage of the higher yields and to protect investors against reinvestment risk while keeping a minimum balance in the current account. High quality credit was included to take advantage of the higher yields available.

Money market yields during June came down on the 3 month Jibar from12.57% to 12.37% while the 12 month Jibar came down from 13.94% to13.85%. The decrease in the 3 month and 12 month yield was due to the expectation of an interest rate hike of 100 basis points instead of 50basis points at the June MPC meeting that took place.

The next MPC meeting will take place on the 14th of August and expectations are that the Reserve Bank will increase the Repo rate by at least another 50 basis points from 12.0% to 12.5%. Forward rates in the money market discount at least an increase of 50 basis points.

During the month major maturities were invested in the short end of the yield curve to insure continuous re -investment at higher interest rates on a frequent basis. Longer term assets were included in the fund to take advantage of the higher yields available while keeping a minimum balance in the current account.

Money market rates during March steadily increased on the 3 month Jibar from 11.32% to 11.375% while the 12-month Jibar traded in a narrow band between 12.20% and 12.28%.

Looking at the 3 month forward rates the market expects the Repo rate to remain at 11% while the long-term forwards suggest that we could see some relief over the next 12 months. The next MPC meeting will take place on the 10th of April and our expectation is for the Repo rate to remain unchanged over the short term.

During the month major maturities were invested in the short end of the yield curve while investing a small portion in the 1-year to take advantage of higher yield and keeping a minimum balance in the current account.

Performance review
The portfolio returned 4.44% for the year underperforming the 5.44% returned by the benchmark. The portfolio currently invests in all maturities in the very short end of the yield curve on all deposits. The portfolio provides investors with an ideal hedge against rand depreciation and access to a well-diversified portfolio of developed market currencies.

Market review
Us dollar 3-month deposit rates came marginally down during the month from as high as 5.01% to 4.70% mainly due to the Fed fund rate that came down. The Fed lowered the Fed Fund Rate from 4.50% to 4.25% in December. Looking forward the Fed fund futures discounts a high possibility for another cut in interest rates at the next meeting taking place on the 30th of January 2008. 3 Month forward rates expect that the Fed will cut interest rates with 25 basis points. EUR 3 month deposit rates traded in a narrow band between 4.65% and 4.75% during the month. The ECB left the lending rate unchanged at 4% on the 6th of December. The next meeting will take place on the 10th of January. Market expectations are that the ECB will keep interest rates unchanged at 4%. The current 3-month forward rates expect interest rates to trend sideways. The GBP 3 month deposit rates decreased from 6.57% to 6.00% during the month due to the unexpected cut in the lending rate by Bank of England on the 6th of December. The lending rate came down by 25 basis points from 5.75% to 5.50%. The next meeting will take place on the 10th of January 2008. We expect that the BOE would leave interest rates unchanged.