The spread between the 3-month Treasury bill rate and the policy rate has been negative since late September 2022, while the JIBAR-repo spread has been slightly higher than its average since 2010. One possible explanation for the negative T-bill spread is that regulatory requirements for banks to hold government securities for liquidity management purposes could be creating excess demand for such securities. But this is unusual for South Africa, because between late 2015 and 2022 the interbank rate was usually lower than the T-bill rate, presumably on account of elevated sovereign risk. It is also curious that T-bills have not been pricing in recent policy tightening when the bond market and money market rates have been. It would be interesting for someone to do some empirical work looking at whether the new monetary policy implementation framework has played any role in this through a shift from a monetary shortage to a surplus. If this, on the other hand, reflects the impact of Basel 3 regulations, it starts raising interesting questions about whether financial stability regulations could be causing some mild financial repression in South Africa.
