After being positive between late 2022 and early 2023, the South African TED spread has remained negative over recent months. The TED spread is a measure of credit and liquidity risk, calculated as the difference between the rate banks lend to each other and the Government’s short-term borrowing costs. The TED spread has, on average, been negative for the last 7 years or so. The recent decline suggests that liquidity and credit premia are currently elevated.
The chart also shows the spreads between the policy rate and two overnight rates: the South African Benchmark Overnight Rate (SABOR) and new South African Rand Interbank Overnight Rate (ZARIBOR), which the SARB has begun publishing. The latter is meant to represent an (almost) risk-free reference rate that would be more representative of inter-bank market conditions than existing benchmarks as it would be less susceptible to manipulation by market participants. The ZARIBOR-repo spread has been larger and more negative on average than the SABOR-repo spread. The SABOR-repo spread has also fallen since the shift to a surplus-based monetary policy regime in June 2022. You can read more about the definitional differences between the new and old benchmark rates here.