Term ZARONIA: Pricing a Benchmark That Doesn't Exist Yet

JIBAR prints for the last time on 31 December 2026, and no new JIBAR contracts have been allowed since 1 May. Its replacement, ZARONIA, is an overnight rate — which means the number a borrower actually pays for an interest period isn't known until the period ends. The market's answer to that in every other currency has been a forward-looking term rate: Term SOFR in the US, Term SONIA in the UK, Term CORRA in Canada.

South Africa is getting one too — eventually. The Market Practitioners Group has selected FTSE Russell to administer Term ZARONIA, but its endorsement is conditional on ZARONIA derivatives liquidity deepening enough to support a robust benchmark. Until then, there is no published number.

There is, however, a liquid enough OIS curve to compute one. So we took the CME Term SOFR methodology, swapped FOMC dates for SARB MPC dates and SOFR futures for ZARONIA OIS quotes, and calculated where Term ZARONIA would print today.

Quick summary

• An indicative 3M Term ZARONIA would print at 6.980% today, against 3M JIBAR's 7.000% fixing — a gap of just 2bp.
• The fitted overnight path implies roughly 45bp of SARB hikes over the next twelve months, stepping up at the September and November meetings.
• The method is CME's: a piecewise-flat overnight rate that jumps only at policy meetings, fitted to market instruments, then compounded daily over the term.
• The input is BlueGamma's ZARONIA swap rates out to 1Y — the same class of instrument FTSE Russell intends to use for the real benchmark.

How CME builds Term SOFR

CME's Term SOFR methodology has three parts, and all three translate cleanly to ZAR:

1. A step-function model of the overnight rate. SOFR is assumed flat between FOMC meetings and allowed to jump only at each meeting's effective date. This is the economically sensible prior for any overnight rate that tracks a policy rate: the path is a staircase, not a spline.
2. Fit to market instruments. CME solves for the step levels that minimise the repricing error of 1M and 3M SOFR futures, using volume-weighted prices sampled over observation windows across the day to resist manipulation.
3. Compound and annualise. Each published tenor (1M, 3M, 6M, 12M) is the daily-compounded growth of the fitted path over that term, annualised on the money-market convention.

The result is a rate known at the start of the interest period that is, by construction, consistent with where the derivatives market prices the compounded overnight path.

Translating it to ZAR

Two substitutions are needed, one trivial and one structural.

The trivial one: FOMC dates become SARB MPC dates, with jumps on the business day after each announcement (repo changes take effect the following day, and ZARONIA tracks the repo tightly).

The structural one: there are no ZARONIA futures. The fitting instruments have to be ZARONIA OIS, which is also what FTSE Russell plans to build the real Term ZARONIA from — following its Term SONIA approach rather than CME's futures-based one. The strip we fit to, from BlueGamma's ZARONIA swap rates:

One property makes the ZAR fit cleaner than it first looks: ZAR OIS inside a year pay a single coupon at maturity, so the par rate is the annualised compounded floating leg — the exact quantity a term rate measures. The objective function is exact, not an approximation.

We solve for seven step levels (one per inter-MPC segment inside the 12-month horizon) by least squares against the six quotes, with a small smoothness penalty on consecutive steps to pin the one spare degree of freedom. Compounding is daily on Actual/365F over the South Africa calendar, with weekends and holidays accruing at the prior business day's rate — the same mechanics as a compounded-in-arrears observation, applied to the projected path instead of the realised one.

Where Term ZARONIA would print

As of 27 August 2026, with the latest ZARONIA fixing at 6.853%, the fit reprices all six OIS quotes to within 0.01bp and produces:

At quoted tenors a term rate built this way must land on the OIS strip — that's the consistency requirement doing its job. The model earns its keep in what sits underneath: the policy path.

The curve is pricing a hike at each of the next two MPC meetings and a slower grind higher through 2027 — about 45bp of tightening over the year. (The 2027 dates follow the SARB's usual meeting cadence; the official calendar slots in when published.)

The JIBAR comparison — and the CAS

Here's the part with money attached. 3M JIBAR fixed at 7.000% today; the indicative 3M Term ZARONIA is 6.980%. The market is currently pricing the gap between a bank-credit-sensitive term rate and a nearly risk-free one at 2bp.

The credit adjustment spread baked into JIBAR fallbacks is 16.19bp — the five-year historical median of 3M JIBAR minus compounded ZARONIA, frozen forever, as covered in our JIBAR transition piece. The two numbers aren't measuring identical things — the CAS compares JIBAR to realised compounded ZARONIA, while today's 2bp gap compares it to the expected path, so a term premium sits inside the difference. But the direction is worth every ZAR borrower's attention: legacy contracts falling back to ZARONIA + 16.19bp are paying a spread the current market prices at a fraction of that. When Term ZARONIA does launch, new loans referencing it will price that basis at market, not at a frozen historical median.

What this is not

An indicative calculation is not a benchmark, and the differences are exactly where the MPG's caution lives. A published Term ZARONIA needs volume-weighted observation windows rather than a single snapshot of mid marks, data sufficiency and fallback rules for thin days, IOSCO-compliant governance, and — the binding constraint — enough underlying derivatives activity that the quotes mean something. It is also a safe bet that its use will be scoped, as Term SOFR's is: loans and trade finance yes, the derivatives market itself largely no. The swaps that Term ZARONIA is built from will keep compounding in arrears.

None of that changes what the number says today. The inputs exist, the method is standard, and anyone pricing a ZAR floating-rate deal for 2027 can already see the term structure the benchmark will eventually publish.

Run it yourself

Everything in this post comes from data you can pull directly: the ZARONIA forward curve, ZAR swap rates, ZARONIA fixings and compounded ZARONIA — in the web app, Excel, or the API.

Start your free trial or book a call with our team — and if you're mid-transition on a JIBAR book, bring the fallback schedule. We insist.