Standard Bank Money Market comment - Sep 10 - Fund Manager Comment10 Dec 2010
The repo rate was cut by 50 basis points at the September MPC meeting, this cut was in line with market expectations. This brings the total rate cuts to 600 basis points. At 9.5%, prime is at the lowest level in South African since January 1981. By lowering rates again, the Governor highlighted that inflation has surprised to the down side and that growth in South Africa has slowed.
The market is pricing in rates to remain sideways for the next year, hence the money market curve is currently flat from the 3 months to the 1 year area. With the yield curve being so flat and the expectation that the next interest rate move will be to the upside, floating rate notes are offering the best value and the duration of the funds will be kept on benchmark.
Standard Bank Money Market comment - Jun 10 - Fund Manager Comment23 Aug 2010
The repo rate was left unchanged during the quarter under review. This was in line with market expectations. Inflation continues to remain within market expectations. PPI was however slightly higher than expected, mostly due to base effects and with higher wage demands and higher electricity prices, PPI is likely to move higher during 2010. Weak domestic demand however, is likely to keep the repo rate sideways for longer, with the next move likely to be up.
The FRA market is predicting rates sideways until the second quarter of next year when rates are predicted to move up. The money market funds will be positioned with the view that rates are likely to remain flat for the year.
Standard Bank Money Market comment - Dec 09 - Fund Manager Comment10 Mar 2010
During the quarter under review the repo rate was dept unchanged. This was widely expected by the markets. Gill Marcus took over as Governor of the Reserve Bank in November and gave her first MPC Speech. Her comments were around inflation, which is expected to remain favourable out to the final quarter of 2010. The single largest threat to inflation is a larger than 25% increase in Eskom tariffs. This is reflected in the FRA market, which is indicating that rates are expected to remain unchanged for the whole of 2010, with a possibility of rates increasing in the first quarter of 2011.
Due to the expectations on rates and concerns around "cost push" inflation potentially filtering through towards the end of 2010, the money market funds will be invested short of the benchmark.