What Is the Johannesburg Interbank Cheap Price (JIBAR)?
The Johannesburg Interbank Cheap Price (JIBAR) is the money market value that is used in South Africa. The benchmark for brief loans and equipment, the velocity is to be had in one-month, three-month, six-month, and 12-month discount words. The 3-month JIBAR value is largely probably the most widely used and authorized.
An individual or industry that seeks to borrow money from a South African monetary establishment will normally be quoted a value tied to the three-month JIBAR, necessarily probably the most in most cases used. For example, the velocity quoted to a borrower looking to get a mortgage may be ‘JIBAR + 7%.’ As fees inside the money market build up, the cost of borrowing moreover will building up, and vice versa.
key takeaways
- The Johannesburg Interbank Cheap Price (JIBAR) is the benchmark for brief interest rates in South Africa.
- Derived from the bid and offer fees from 8 number one banks, JIBAR is to be had in words ranging from one to 12 months, with the three-month value necessarily probably the most in most cases used reference.
- JIBAR fees are used in atmosphere monetary establishment certificate of deposit fees, loan fees, and futures contract fees.
Figuring out the Johannesburg Interbank Cheap Price (JIBAR)
This present day, the Johannesburg Interbank Cheap Price (JIBAR) is used for the reason that benchmark for brief interest rates inside the South African markets. It is made up our minds as a median of the borrowing and lending fees indicated by means of a large number of local and international banks. JIBAR is calculated as a yield and then reworked proper right into a discount.
The rate is calculated daily by means of the Johannesburg Stock Change for one-month, three-month, six-month, and 12-month discount words in any case bid and offer fees are received by means of taking part banks. The derived value is then used by banks to buy and advertise their own Negotiable Certificates of Deposit (NCDs).
The bid and offer fees used to calculate JIBAR are submitted by means of 8 banks that transact with NCDs of at least 100 million rands (the South African foreign exchange). A mid-rate is calculated as a halfway degree between the bid and offer fees supplied by means of individuals. The two easiest and two lowest mid-rates are discarded, and the remaining 4 mid fees are averaged to achieve at JIBAR.
While JIBAR represents NCD fees, it moreover represents, to a lesser extent, the cost of funding inside the foreign currency (FX) forward and the house market for fastened monetary establishment deposits.
6.8%
The three-month JIBOR as of Jan. 2, 2020
Johannesburg Interbank Cheap Price (JIBAR) and Derivatives
JIBAR is also crucial tool inside the interest rate derivatives market. JIBAR Futures (STIR) are brief interest rate futures contracts that experience the three-month Johannesburg Interbank Cheap Price for the reason that underlying tool. This exchange-traded contract has a value at its expiration of 100 minus the three-month JIBAR value at the expiry date. The contract is a superb methodology to succeed in exposure to the South African interest rate market and can be utilized by means of hedgers in the hunt for protection towards adversarial interest rate movements and speculators hoping to benefit from brief movements in interest rates.
The value of the STIR contract decreases as the anticipated three-month JIBAR value at futures expiry will building up. When interest rates are expected to move up, an investor or broker will temporary the contract. Investors move long the contract when they consider interest rates will decrease at some point in the future.
Example of the Johannesburg Interbank Cheap Price (JIBAR)
The calculation of a South African reference value started inside the 1990s with the South African Futures Change (Safex) Monetary establishment Bill value. The existing reference value device was once established in 1999. Prior to November 2012, the acronym stood for the Johannesburg Interbank Agreed Price.
Consistent with the South African Reserve Monetary establishment, the three-month JIBOR averaged 8.19% from 1999 until 2020, attaining an all-time top of 16.96% in February 1999 and a document low of 5.06% in September 2012.
The existing JIBAR value is available daily from Thomson Reuters and Bloomberg.
Other an equivalent brief reference fees include the London Interbank Offered Price (LIBOR), Euro Interbank Offered Price (EURIBOR), Nigerian Interbank Offered Price (NIBOR), Norwegian Inter-Monetary establishment Offered Price (NIBOR), and so forth.
