Interest Rate Update (May 2024)

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 4.71% pa and the 3 year wholesale Bill rate is 4.32% pa, a discount of 0.39% pa or 39 basis points for the longer term.  The premium for the 6 month rate over the 3 year rate peaked in March at 70 basis points, a level not seen since 2011. Since March, the premium has diminished on higher than predicted inflation data, and better than expected employment figures, which has influenced the 3 year rates to a greater extent than the 6 month rates.

The market had been forecasting with a high degree of certainty, at least one rate cut prior to the end of the year domestically, and multiple in the USA. However, the latest economic data is suggesting that this is now unlikely, due to the previously mentioned factors, but the trend can reverse in a few days due to divergent economic news. This is demonstrated in the graph by the spike in both the 6 month and 3 year rates during April.