SIM Money Market comment - Sept 13 - Fund Manager Comment07 Jan 2014
Market review
During the quarter, the Monetary Policy Committee (MPC) left the repo rate unchanged at 5.00%. The last meeting was on September 19. The next meeting will be on November 21, 2013. At 6.40%, inflation is above the upper target band of the Reserve Bank's target range. Risks to inflation remain evenly balanced and inflation is expected breach the upper target band in the short term but in the long term to come down into the 3% and 6 % target range.
The money market curve steepened during the quarter, with the three-month rate coming down 1.5 basis points to 5.135% from 5.15%, while the 12-month rate increased from 5.825% to end the quarter at 5.992%. Three-month Treasury Bills traded above the bank rates (NCD's), while credit spreads stabilised at lower levels during the quarter.
The current forward rates suggest that the repo rate will remain unchanged for an extended period, with the risk skewed towards a rate hike going forward.
What SIM did
We invested in all maturities across the money market yield curve during the quarter. Quality corporate credit, which traded above the three-month money market rates, was added to the portfolio. We included floating rate notes and some negotiable certificates of deposits in the portfolio. The combination of corporate credit, floating rate notes and negotiable certificate of deposits will enhance portfolio returns.
SIM strategy
Our preferred investments would be a combination of fixed rate notes (NCD's), floating rate notes and quality corporate credit to enhance portfolio returns. We expect the repo rate to remain unchanged at the next MPC meeting.
SIM Money Market comment - Jun 13 - Fund Manager Comment06 Jan 2014
Market review
During the quarter, the Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.00% at their May 23 meeting. At 5.6%, inflation was below the upper band of the Reserve Bank's target range. Risks to inflation remain evenly balanced and inflation is expected to remain within the target range. The money market curve steepened during the quarter, with the three-month rate increasing from 5.125% to 5.150%, while the 12 -month rate increased from 5.662% to 5.825%.
Treasury bills traded above the bank rates and credit spreads on short-term corporate credit decreased during the quarter. The current forward rates suggest that the repo rate will remain unchanged for an extended period, with the risk leaning towards a rate hike going forward.
What SIM did
We invested in all maturities across the money market yield curve during the quarter. Quality corporate credit, which traded above the three-month money market rates, was added to the portfolio. We also included floating rate notes and some negotiable certificates of deposit in the portfolio. The combination of corporate credit, floating rate notes and negotiable certificate of deposit will enhance portfolio returns.
SIM strategy
Our preferred investments would be in floating rate notes and quality corporate credit to enhance portfolio returns. We expect the repo rate to remain unchanged at the next MPC meeting.