October proved to be another active month for the TD market and again a very poor month for TD investors as all banks bar one, slashed offerings across all tenors in reaction to the RBA’s subsequent rate cut, which saw the cash rate lowered by 25 basis points to 0.75%.
In the short term (ST) market, BOQ (-0.05%) continued to trend downwards, whilst BEN (+0.20%) bucked this trend, resulting in its short-term (ST) lending rates ending equally at 1.50% for the regionals. For the majors, NAB (-0.20%) led the decline while CBA (-0.15%) and WBC (-0.15%) each reduced their ST lending rates by 15 basis points. ANZ (-0.10%) again was more conservative with its rate cuts, with only a 10-bps reduction. In the wake of the latest round of reductions, BEN and BOQ rank equally for the regionals, whilst ANZ offers the best value amongst the majors.
BOQ decreased its medium-term (MT) offering by a further 15bps and continues to provide the most attractive option for savers at 1.55% despite three consecutive months of declines. For the majors ANZ and CBA provide the best value at 1.35% following reductions of 0.20% and 0.05% respectively. NAB (-0.25%), WBC (-0.15%), offering MT deposit rates of 1.10%, 1.15% respectively, remain the least attractive options following their significant rate reductions.
Finally, long-term (LT) rates saw similar movements as LT interest rate expectations continue to trend downward. BOQ (-0.10%) once again offers the best value for investors at 1.55%, trailed by CBA at 1.45% (best value of the majors) which left its LT tenor steady, whilst ANZ (-0.20%) and BEN (-0.25%) offer less value at 1.40% and 1.25% respectively after the cuts. WBC (-0.15%) and NAB (-0.20%) were the least investor-friendly, as both banks cut their LT savings offering, providing the low deposit rates of 1.20%.
Figure 1. Term Deposit Spread Over Relevant BBSW: October 2019 vs September 2019
Note: Short Term (~3M), Medium Term (~6M), Long Term (~12M)
Source: RBA, BondAdviser
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