MacLeod thinks there will be buy opportunities presented. Spreads are measured by subtracting the yield of a debt instrument to a certain benchmark, usually the three-month Johannesburg interbank agreed rate or similar-dated government debt.
The f und recently added more Treasury bills, or short-term government debt, to its portfolio.
The government’s medium-term budget, which gives the executive’s planned spending over a three-year period, was “impressive” and hinges on the implementation thereof, she said.
Inflation, which is a key determinant for money-market funds as managers tried to achieve real rates of return, also “surprised” the market, MacLeod said. The consumer price index, which the Reserve Bank uses as inf lation benchmark, dipped below the upper target of the Monetary Policy for the first time in September.
Inflation breached the 6% mark since March this year, according to Stats SA. For 2015, MacLeod forecasts an average rate of around 5% driven by a decline in the oil and food prices.
“Those two factors led to a little rally in the bond market,” she said.
MacLeod e s t i mated t hat t he repurchase rate, at which the Reserve Bank lends to commercial banks on a short-term base, will remain unchanged at 5.75% for the remainder of the year. In 2015 we will probably see a “small, muted” increase, she said. With the US Federal Reserve expected to increase interest rates as the American economy continues its recovery, the Reserve Bank will need to follow suit in a bid to keep foreign investments f lowing into South Africa, MacLeod explained.
Going for ward, she expects t he money market to return between 6.5% and 7% over the next year, bonds to ret urn bet ween 7.5% and 8% and corporate credit about 1.5 percentage points above bonds.