According to the latest ASX 30 Day Interbank Cash Rate Futures contracts, the market believes there is a 52% probability of the Reserve Bank of Australia cutting the cash rate at its October meeting.
Whilst the market is divided on the October meeting, it is united in the belief that the cash rate will be taken down a notch the following month. The cash rate futures implied yield curve reveals an almost 100% probability that rates will be at 0.75% in November.
If the central bank does in fact cut the cash rate in the next two months, it is likely to lead to further cuts to the interest rates being offered with term deposits.
But don't worry, because the dividend shares listed below could be great term deposit replacements. Here's why:
Macquarie Group Ltd (ASX: MQG)
I think Macquarie's shares would be a great alternative to term deposits due the quality of its operations and its long track record of dividend increases. In addition to this, it offers a generous dividend yield that I think is especially attractive given the low interest rate environment. At present Macquarie's shares offer a trailing 4.5% partially franked dividend yield.
Scentre Group (ASX: SCG)
Scentre Group is the owner of all the Westfield properties in the ANZ region. Thanks to the quality of these assets and the strong demand it has continued to experience for its tenancies, I remain confident that it is well-placed to grow its distribution at a steady rate over the next few years. At present its units offer a trailing 5.5% distribution yield.
Transurban Group (ASX: TCL)
Another dividend share to consider as an alternative to term deposits is this toll road giant. I think it could be one of the best options on the Australian share market for income investors due to the quality of its portfolio, its strong pricing power, and long track record of distribution increases. In FY 2020 the company intends to increase its distribution by 5.1% to 62 cents per security, which equates to a forward 4.15% forward yield.
