Abil fall­out

Finweek English Edition - - MONEY -

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.

Lisa MacLeod

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