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Appendix 3  Sample Table of Rates

Below is a sample of assumptions as at 31 May based on the Treasury methodology described in this paper.

Table based on market rates at 31 May 2010

This table is duration based and is to be used for valuations as at 31 May 2010.

Year CPI
31 March year
Forward
Rate
Spot
Rate
1 5.9% * 3.44% 3.44%
2 2.4% 4.69% 4.06%
3 2.4% 5.35% 4.49%
4 2.5% 5.82% 4.82%
5 2.5% 6.14% 5.08%
6 2.5% 6.33% 5.29%
7 2.5% 6.38% 5.44%
8 2.5% 6.38% 5.56%
9 2.5% 6.38% 5.65%
10 2.5% 6.38% 5.72%
11 2.5% 6.38% 5.78%
12 2.5% 6.34% 5.83%
13 2.5% 6.26% 5.86%
14 2.5% 6.19% 5.89%
15 2.5% 6.11% 5.90%
16 2.5% 6.03% 5.91%
17 2.5% 6.00% 5.91%
18 2.5% 6.00% 5.92%
19 2.5% 6.00% 5.92%
20 2.5% 6.00% 5.93%
20 plus 2.5% 6.00%  

* Note CPI includes 2.0% due to GST increase from 12.5% to 15%.

Table of forecast June 2010 rates based on market rates at 31 May 2010

This table is to be used for forecast valuations as at 30 June 2010 that used 30 June year cash flows.

June Valuation Year
(year ending 30 June)
CPI
31 March year
Forward rate Spot Rate
2011 5.9% * 3.58% 3.58%
2012 2.4% 4.76% 4.17%
2013 2.4% 5.39% 4.57%
2014 2.5% 5.85% 4.89%
2015 2.5% 6.16% 5.14%
2016 2.5% 6.34% 5.34%
2017 2.5% 6.38% 5.49%
2018 2.5% 6.38% 5.60%
2019 2.5% 6.38% 5.69%
2020 2.5% 6.38% 5.76%
2021 2.5% 6.38% 5.81%
2022 2.5% 6.33% 5.86%
2023 2.5% 6.26% 5.89%
2024 2.5% 6.18% 5.91%
2025 2.5% 6.10% 5.92%
2026 2.5% 6.03% 5.93%
2027 2.5% 6.00% 5.93%
2028 2.5% 6.00% 5.94%
2029 2.5% 6.00% 5.94%
2030 2.5% 6.00% 5.94%
2030 plus 2.5% 6.00%  

Note this table is intended to represent the market's current view of interest rates for June years, consequently the rates shift by one month, ie, the first year above is derived from rates for months 2 to 13, the second year from months 14 to 25, etc.

* Note CPI includes 2.0% due to GST increase from 12.5% to 15%.

The resulting fitted rates are plotted below. Note that while the forward rates look somewhat artificial the spot rates that they generate look reasonable and are smooth.

Yield Curve 31 May 2010
Yield Curve 31 May 2010.

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