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David Chaston looks at the bank rate offers for savers in the light of rising interest rate expectations and finds a focus on bonus saver accounts
It is almost certain that Graeme Wheeler will raise the OCR again on Thursday by another 0.25%.
It will likely be just the second in a two year series of similar increases.
If you think we are in a period of rising rates, borrowers should fix their rate for as long as they are comfortable with.
But what should savers do?
They probably should do the opposite - go short.
Firstly, there seems little point in locking in longer 'higher' fixed rates if those rates are going to be even higher in the future.
Secondly, those longer term rates may not be going up as fast as the OCR. They might (ANZ raised all their term deposit rates by 0.25% soon after the first OCR increase) but they might not too. The fact is, term deposit rates for longer than 12 months are more influenced by the international bond yields through our swaps market. The OCR direction has little influence here.
The OCR drives 90 day bill rate expectations. These have a major influence on short term rates - those under 12 months.
In fact, the highest rate on offer in our table is the 4.35% in the Co-op Bank's Step Saver account, beating all other banks one year term deposit rates.
Recent swap curves have been flattening - meaning short rates have been rising while long rates have been stable, even falling.
It is not hard to contemplate an inverse rate curve - where short rates are higher than long rates - very much as we had for three years between 2005 and 2008, although the background conditions now are different.
The time for savers to think about moving away from short rates will be when the Reserve Bank has come to the end of its rate hike cycle, and that is not currently scheduled to be until later in 2015.
RBNZ data on how our call and term deposit funds are changing is a little opaque because the data they publish as 'retail' bank funding mixes the accounts for individuals and businesses together.
However, long term we have always had the majority of our household deposits in very short durations - less than a year.
And over the last twelve months, this has got even more pronounced. Call funds have risen from 19.5% to 22.6% of all "NZ dollar retail funding", 2 to 90 day deposits have fallen from 23.4% to 20.4%, 90 day to 1 year deposits have fallen from 26.6% to 24.6%, and terms over 1 year have fallen from 5.3% to 5.2%. These changes have happened as overall balances have risen by $13.9 billion to $196 billion. We also have 3% more, over the past year, in our current and eftpos accounts.
Following the changing interest rate signals, we are all going short.
This helps explain why banks are more aggressive in the way they pitch their bonus saver offers over the more traditional term deposit offers.
And it is likely that ANZ's market-leading 5.75% for five years is attracting very little support.