Letters of the Week

Term deposits. Where’s the rally? Bank credit ratings.

Term deposits
I would love to see Robert Gottliebsen write on the subject of term deposits after reading where Rabobank, UBank, and ING gave $250,000 government guarantees on deposits. Currently, Commonwealth Bank, ANZ and Westpac offer 4.75%, and NAB 5%, on term deposits. Since Labor came to power, not one policy has helped the self-funded retiree. I have read before that 70% of Australians prefer to invest in term deposits, yet little attention is paid to the subject in the media.

– B Collins

Editor’s response: Robert has taken up readers’ requests to write on term deposits, and addressed Rabobank’s performance on Monday.

Where’s the rally?

I love reading Eureka Report, and I am only a beginner in the stockmarket and these are interesting times to play around. I’ve also been reading some people saying that the sharemarket is crashing purely because the cash from QE packages is running out of puff, simply triggering the law of supply and demand. I wonder what your view is, but let's assume for a moment that the Fed will commence QE3: which sector (in Australia) you think is most likely to rally from any stimulus package?

– M Knol

Australian bank risk

As a follow on to Robert Gottliebsen's comments, could you please publish a list of the credit ratings (Moody's, S&P etc) of the banks that operate in Australia and what you would consider to be the lowest level of rating that one should consider investing in (ignoring the government guarantee). One is conscious of trying to maintain a reasonable rate of return, but one does not wish to risk losing the lot in this pursuit. Governments have been known to 'postpone’ delivering on promises.

– A Thomas

Editor’s response: As a quick general guide, S&P rates Australia’s big four banks as AA-, its fourth highest rating, and Macquarie as BBB after a downgrade in December. Fitch also has all four big banks at AA-, after it downgraded CBA, NAB and WBC in February. Bank of Queensland is rated lower, at BBB by S&P and A3 by Moody’s with a negative outlook. Bendigo & Adelaide Bank is A- rated S&P. However it should also be noted the major ratings agencies no longer provide ratings for retail investment products, so these ratings may not apply if you were considering investing in the banks via a notes issue for example.

To read this week’s letters, click here.