Bank Deposit Broker

Wholesale Deposit Broker

It is widely acknowledged that Australia’s prudent fiscal and monetary policy decisions have averted the financial difficulties currently being faced by other developed nations. This has largely been instigated by a pro-active approach to the management of Australia’s financial system by the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of Australia.

Consequently, Australia’s interest rates provide higher returns on deposit products than most other developed countries. While in the USA, for example, short-term rates have been sitting in a band of between 0% – 0.25% for some time, yields in Australia are significantly higher.

In October 2011 the official overnight cash rate was 4.75% with three and five-year wholesale yields at 4.35% and 4.75% respectively. Plotting yields against term creates what’s called the yield curve – the backbone of interest rate markets. The yield Curve can provide information on inflationary and economic expectations as well as what term presents as the best value. Interest rate based investments can be made through Fixed Income Securities or through deposits with APRA regulated Banks, Building Societies or Credit Unions (ADIs).

Fixed Income Securities and Wholesale Term Deposits

The Australian non-government debt bond market is the 5th largest in terms of percentage of GDP amongst the developed nations. Australia’s public debt market is smaller in comparison due to the frugal fiscal behavior of the authorities in power at both the State and Federal levels.

Fixed Income securities provide a regular stream of payments over the life of the security and the capital is repaid at maturity. They are suitable for long-term investors whom are prepared to take a view on the longevity of the underlying entity. These investors have a different set of investment priorities to those involved in the highly volatile equity markets. Fixed interest securities are often considered a “defensive” investment.

Term deposits provide a fixed return to the investor and have a set maturity date. The depositor does not have access to the funds prior to the maturity date and in return is offered a higher interest rate to “lock” the funds in place. Term deposits can be made for terms sitting anywhere along the yield curve but between 30 to 180 days is the most common term. Deposits rank above senior fixed interest securities in the event of a wind-up.

According to the Australian Bureau of Statistics 22.1 percent of Australian household assets are now comprised of savings accounts and term deposits. Similarly, a recent Westpac-Melbourne Institute Index of Consumer Sentiment found 37.8 per cent of people believed bank deposits were the wisest place to put their money. That is the highest reading in the survey for 37 years and reflects investor’s disenchantment with other asset classes such as equities.

With quite a number of Australian Banks, Foreign Subsidiary Banks, Building Societies and Credit Unions providing a range of deposit products, at various yields, engaging the services of a ‘deposit broker’ to help navigate through the myriad options is invaluable. Typically, specialist deposit broking firms, such as independent broker Curve Securities, are able to collate and access this diversity through over 50 direct ADI relationships handpicking superior yields at the terms desired. These firms simplify the investment process by taking care of much of the paperwork and generally offer their services for free as the ADIs pay them for introducing the depositor.