MONDAY, 10.30AM
The rate on three-month treasury bills dropped 20 basis points at Friday’s weekly auction, from 15,64% to 15,46%, a sure sign of market expectations of an imminent drop in long-term interest rates.
The bills are bought by commercial banks at a weekly Reserve Bank auction. The Reserve Bank pays the bills back with interest on muturity, and the price of bills rises when the interest rate drops. Friday’s rate drop on t-bills suggests banks were bidding aggressively for short-term interest-bearing instruments in anticipation of an interest rate cut soon.
Speculation of an imminent rate cut also led to drops in other money market rates last week, despite the conventional wisdom that Reserve Bank governor Chris Stals will only announe a rates cut on July 1 at the earliest.