Yield Projections

There are two more MPC meetings this year, one ending on 22 September and the final one for 2022 on 24 November. 

Some thoughts on rates are set out below. 

• Taquanta Asset Managers, the Best of Breed manager for the Nedgroup Investments Cash Solutions fund range, see interest rates rising by 75bps on 22 September. This is based on the higher than expected US inflation and the aggressive hikes that the Fed will be forced to make to US Dollar rates. 
• Inflation is expected to be more persistent and so looking ahead Taquanta see rate hikes continuing, peaking in Q1 2023, 150 – 175bps above current rates. 
• The forward rates priced in by the market via the FRA curve reflects a more hawkish outlook showing rates rising for longer and peaking 200bps above current levels. 
• The South African Reserve Bank is under pressure to keep abreast of US rates and simply cannot be left behind. The alternative is risking a weaker rand, which in turn will be inflationary. 
• The Nedgroup Investments Cash Solutions funds are positioned with high liquidity levels and are fully invested in floating rate instruments so that rising rates pass through to investors in the fund range. 
• The indicative 10 week yield trajectories on the R55b Nedgroup Investments Core Income fund, based on a 50bps or 75bps hike, are reflected below. While the fund is fully invested in instruments of a floating rate nature, there is a lag in rate hikes being reflected in the fund yields as these instruments typically reset every 3 months.