In something of a curious move, ASB has trimmed two key term deposit rates Thursday.
It has cut five basis points from its six month term deposit offer, to 6.00%, and cut 10 bps from its one year offer to 5.90%.
What makes these moves curious are a number of factors.
Firstly, other main banks are not trimming, yet anyway. (Or some did it a while ago.)
Secondly, wholesale interest rates are rising, and have spurted higher on the recent inflation data. You can see how that is happening in the swap rate charts below.
And thirdly, wholesale market pricing for the future Official Cash Rate (OCR) track is winding back the prospects of RBNZ rate cuts rather fast over the past week. We get this perspective daily and this market pricing has gone from implying three rate cuts just two weeks ago, to only two -25 bps cuts at the start of this week, to today now only pricing in one -25 bps cut and not now until the November 27 RBNZ review. That is a fast rollback and if it continues, the next indication might be that financial markets won't be pricing in any in 2024.
Of course, banks need customer deposits to allow loans to be made. They fund their lending from capital, wholesale borrowings and customer deposits. The largest funding source is the "non-market" customer deposit base. See the Reserve Bank series L3. Total customer deposits make up nearly three quarters (73.5%) of all funding, and household deposits make up a bit more than half of those (54.2%, S40).
But if loan demand is weak, they don't need to grow that deposit base, so they need to dial back on the incoming household deposits, 53% of which are in the form of term deposits.
Responding to weak loan demand is not much to do with the movements in wholesale interest rates (here or overseas) or funding sources, and a lot to do with customer deposit flows.
That is why wholesale rates can rise, and prospects for future OCR rate cuts can fall, but banks will still trim term deposit rate offers.
It is largely due to loan demand.
And currently, that is weak.
In February 2024, new mortgage loan demand was 4% lower than the average for a February month over the past decade (C31). Total bank mortgage loan growth (C5) was under 3.1%, the slowest pace in almost 12 years. And it is not as though other sectors are picking up the slack. Business loan growth is 1.7% versus 5.7% in February a year earlier. Rural loan growth was a measly 1.0% and has been weak (even negative) since 2019. Without home loan growth, competition for deposits will be tepid at best.
And all this comes as customer deposit balances rose in February by their second fastest year-on-year rate in 15 months. (L3)
Household term deposit savers may be facing a period where they are actively shunned by banks. We are not quite there yet, but it is uncomfortably close.
Currently Heartland Bank and Rabobank generally have the highest longer term rates. The Bank of China joins them with the highest short-term rates
Use the term deposit calculator here, or the one below the table, to calculator your expected net returns.
The latest headline term deposit rate offers are in this table after the recent increases.
| for a $25,000 deposit April 18, 2024 |
Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Main banks | ||||||||
| ANZ | AA- | 4.30 | 6.00 | 6.00 | 6.00 | 5.90 | 5.65 | 5.30 |
 |
AA- | 4.40 | 6.00 -0.05 |
6.10 |
5.90 -0.10 |
5.90 | 5.60 | 5.30 |
 |
AA- | 4.30 | 6.05 | 6.10 | 6.00 | 5.90 | 5.60 | 5.30 |
 |
A | 4.40 | 6.15 | 6.10 | 6.10 | 5.60 | 5.25 | |
 |
AA- | 4.30 | 6.00 | 6.00 | 5.90 | 5.80 | 5.50 | 5.30 |
| Other banks | ||||||||
| Bank of China | A | 5.50 | 6.20 | 6.20 | 6.15 | 5.95 | 5.70 | 5.35 |
| China Constr. Bank | A | 5.50 | 5.80 | 5.90 | 6.00 | 5.85 | 5.65 | 5.40 |
| Co-operative Bank | BBB | 4.20 | 6.15 | 6.10 | 6.10 | 5.90 | 5.70 | 5.35 |
| Heartland Bank | BBB | 5.50 | 6.05 | 6.15 | 6.30 | 6.10 | 6.10 | 5.85 |
| ICBC | A | 5.35 | 6.15 | 6.15 | 6.20 | 5.95 | 5.90 | 5.55 |
| Kookmin Bank | A | 4.40 | 5.60 | 5.70 | 6.00 | 5.00 | 4.60 | |
 |
A | 5.05 | 6.15 | 6.20 | 6.30 | 6.10 | 6.10 | 5.90 |
 |
BBB | 4.30 | 6.10 | 6.15 | 6.05 | 5.60 | 5.60 | 5.30 |
 |
A- | 4.25 | 6.00 | 6.00 | 6.10 | 5.90 | 5.65 | 5.35 |
Term deposit rates
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Daily swap rates
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