Interest Rate Update (May 2023)

The following graph shows movements in both the 6 month and 3 year Bank Bill yield rates, for the period January 2018 to date.

 These rates are wholesale rates which are net of any margin charged by financial institutions. It is not uncommon for retail premiums for 3 year fixed rates, to be 0.30% pa or 30 basis points above the wholesale premium.

 Currently the 6 month wholesale Bill rate is 3.86% pa and the 3 year wholesale Bill rate is 3.36% pa, a discount of 0.50% pa or 50 basis points for the longer term.  This is the first significant negative yield curve since 2020, with the 50 basis point discount, the greatest seen since 2011.

 As the graph below illustrates, rates have stabilised from the rapid rise during 2022, with all indications suggesting that minimal further rises are expected. There is also the potential downside to rate movements, with poor economic growth projections and high inflation rates, both domestically and globally. With a negative yield curve, clients should contact their bank manager to discuss extending interest rate rolls from 30 days to 90 or 180 days, to take advantage of the lower rate if possible.