Guaranteed Investments - Q&A

Question:

Why don't interest rates offered by guaranteed plans increase in step with an increase in Repo rate by the Reserve Bank?

Answer by Robbie Wiggett, Discovery Invest Investment Specialist:
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Our guaranteed rates are derived from the returns of government bond yields. A bond yield has two components nl interest and Capital. If interest rates go higher, the value capital portion becomes less, so although interest rates went up, the total return( capital + interest) on the bond may not necessarily be higher.