September proved to be a busy month for the TD market and a very poor month for TD investors, with all banks slashing offerings across all tenors in anticipation of the RBA’s subsequent rate cut, which saw the cash rate lowered by 25 basis points to 0.75%.
BOQ (-0.35%) and BEN (-0.30%) led the way, aggressively cutting their short-term (ST) lending rates to 1.30% and 1.55% respectively. For the majors, CBA (-0.10%), NAB (-0.10%) and WBC (-0.10%) each reduced their ST lending rates by 10 basis points. ANZ (-0.05%) was more conservative with its rate cuts, with only a 5-bps reduction. In the wake of the latest cuts, ANZ and BOQ continue to offer the most attractive short-term savings options at 1.55% each.
BOQ decreased its medium-term (MT) offering by 0.20%, and which continues to provide the most attractive option for savers at 1.70%. Following BOQ was ANZ and BEN, which cut rates by 0.05% each. CBA (-0.15%), NAB (-0.15%) and WBC (-0.10%), offering MT deposit rates of 1.40%, 1.35% and 1.30% respectively, remain the least attractive options following their significant rate reductions. There remains considerable variation in the value offered across MT rates, with a notable 0.40% difference between WBC (lowest at 1.30%) and BOQ (highest at 1.70%).
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 1.65%, trailed by ANZ (-0.10%) at 1.60% (best value of the majors), whilst CBA (-0.05%) and BEN (-0.05%) offer less value at 1.45% following their cuts. WBC and NAB were the least investor friendly, as both banks cut their LT savings offerings by 0.20%, with WBC providing the least attractive deposit rate of 1.35%.
Note: Short Term (~3M), Medium Term (~6M), Long Term (~12M)
Figure 1. Term Deposit Spread Over Relevant BBSW: September 2019 vs August 2019
Source: RBA, BondAdviser
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