It is nervous times for term deposit investors.
Wholesale swap rates have dived in the past week, and that implies that banks will be resetting term deposit offer rates lower at some stage. After all, why offer retail investors more than what can be raised 'efficiently' at scale in wholesale markets?
In the past few days, three banks have changed rates.
Firstly, Kiwibank has raised its 200 day 'special offer' from 3.25% to 3.40%, a +15 basis points rise.
This has resulted in an attractive rate for the large pool of funds invested in the six-to-nine month duration period. Only Heartland Bank has a higher offer than Kiwibank (3.45%). Rates at this level for this term are mostly -10 to -15 basis points lower from all other bank offerors.
But Kiwibank's move has proven to be unusual.
BNZ has today (Tuesday) trimmed all its term deposit offer rates for terms of one year to five years by -5 to -15 basis points.
BNZ's changes are either very brave (?) or a signal of what is about to come from their main rivals. From durations of eighteen months, BNZ is offering rates -10 to -15 basis points below their main rivals. For durations of two years, the underbid is -20 basis points from the equivalent ASB offer.
And SBS Bank has also trimmed its offers of eighteen months and longer rates also by -5 to -15 basis points.
This change means there are now no bank offers of 4% or more for any term of three years or less; SBS Bank was the last to offer them, and this is no more.
PIE rates can give a small boost to pre-tax return equivalents.
Meanwhile, over the past two weeks, wholesale swap rates have shifted sharply lower. One year swap rates are down -5 basis points, two year rates are down -13 basis points, and three year rates are down -18 basis points. In the world of wholesale swap rates, these are big, fast movements, ones bank treasurers will have noticed.
Using our deposit calculator to figure exactly how much benefit each option is worth you can assess the value of more or less frequent interest payment terms, and the PIE products, comparing two situations side by side.
The latest headline rate offers are in this table.
|for a $25,000 deposit||Rating||3/4 mths||5/6/7 mths||8/9 mths||1 yr||18 mths||2 yrs||3 yrs|
Rates in this table are the highest offered by each institution for the terms listed. You however will need to check how often interest is credited or paid. That important factor is not filtered in the above table and rates with various interest payment/credit arrangements are mixed here. However, our full tables do disclose the offer basis.
Our unique term deposit calculator can help quantify what each offer will net you.