(SAONIA) rate with improved benchmark overnight rates
26 March 2007
With effect from Wednesday, 28 March 2007, the South African Reserve Bank
(SARB) will replace the overnight interbank rates that are published daily on
its website, on Reuters and on I-Net with new benchmark call rates. The rates
that will be discontinued are:
1) South African Overnight Interbank Average (SAONIA) rate
2) SAONIA +
3) FX Forwards rate
4) Carry Rates
These rates will be replaced by two new rates, namely:
1) South African Benchmark Overnight Rate on deposits (SABOR)
2) Implied rate on one-day rand funding in the foreign exchange swap market
(the overnight FX rate).
The replacement of the four existing rates with two new rates is the result
of a process of consultation with the main participants in the money market and
other stakeholders, under the auspices of the Money Market Liaison Group
(MMLG). (The Money Market Liaison Group is a committee comprising members from
the SARB and money-market participants from the commercial banks, which meets
three times per year to discuss issues of mutual interest). A number of
deficiencies with the previous rates have been identified, which had prevented
these rates from becoming true benchmarks for pricing in the overnight portion
of the money market, as had originally been intended.
The new rates are an attempt to address these shortcomings. The main changes
that have been made relate to the broadening of the calculation bases of the
rates to include not only interbank funding, but also some wholesale funding.
Also, the definition of "overnight" has been extended to include any funding
available on call. In addition, measures have been put in place to increase the
credibility of the rates. These measures have increased the reliability of the
rates and decreased the ability of a single institution to influence the rates,
whether intentionally or by coincidence.
Providing an improved and credible benchmark for funding available on demand
is seen as a step forward in improving the efficiency of and transparency in
the very short end of the money market. The SARB and the MMLG are committed to
continuing improving the functioning of the domestic money market.
For more detail on the new rates, please refer to the implementation
document, entitled Overnight Funding Rates published by the South African
Reserve Bank, available on the SARB website under Financial Markets/Market
Research.
Any further queries in this regard can be referred to:
Dr Roelf du Plooy
Head: Financial Markets Department
Tel: (012) 313 4213
Fax: (012) 313 3969
E-mail: Roelf.DuPlooy@resbank.co.za
Ms Trudie Coode
Tel: (012) 313 3355
Fax: (012) 313 3969
E-mail Trudie.Coode@resbank.co.za
Issued by: South African Reserve Bank
Source: South African Reserve Bank (http://www.reservebank.co.za)
