Since the start of its publication, ZARONIA (South African Rand Overnight Index Average) has had a negative spread to the policy rate. Today’s chart shows that the South African Benchmark Overnight Rate (SABOR), the current overnight benchmark rate in South Africa, has also been below the policy rate since the implementation of the new monetary policy implementation regime in June 2022. ZARONIA is a new money market reference rate which is meant to be more representative of unsecured overnight rates than SABOR. A negative spread in the case of the new reference rate reflects SARB’s unremunerated cash requirements on banks, and specific aspects of its calculation, such as trimming of very high and very low rate transactions from ZARONIA’s calculation, for example. Since the repo is a secured rate, it is important that secured benchmark rates are also published to enable monitoring of whether policy changes are being reflected in market conditions. SARB is planning to publish ZASFR, the South African Secured Overnight Financing Rate, a secured overnight benchmark, but has not made it available as yet.
