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SA government bonds weaken

Following slightly hawkish Sarb policy statement and signals of a US rate hike.

JOHANNESBURG – South African government bonds weakened across the board early Monday as a slightly hawkish policy statement by the
South African Reserve Bank last week and signals of a rate hike in U.S by September pushed yields higher.

The yield on the highly-traded government issue due in 2026 rose 11 basis points to a 1-1/2 week high 7.94 percent by 0800 GMT.

“We saw some foreign selling of bonds late on Friday, which has probably added to today’s weakness,” fixed income specialist Alexa Nicolau of Rand Merchant Bank told Reuters.

South Africa’s central bank said on Thursday that the near-term inflation outlook had deteriorated, meaning the scope to pause on policy tightening had narrowed.

“If the SARB raises rates anytime soon then the bonds start to look slightly less attractive,” Nicolau said.

Statistics from the Johannesburg Securities earlier showed foreign investors had purchased a mere 600 million rand ($50 million) worth of bonds last week. The data also showed foreigners had sold a total of 4.1 billion rand worth of bonds so far this year.

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