Bond analysts are sharply divided over the future prospects of the market, but on a balance of probabilities domestic bonds may surprise on the upside as foreigners continue to seek yield, political risk notwithstanding.Domestic bonds have been the best-performing asset class for the first nine months of 2016, growing 15.5%. The property index delivered 8.82% growth and cash yielded 5.42%. Equities firmed 4.82%. The R207 has been the market favourite, strengthening 13.2% so far in 2016 as yields fell on rising prices. The R186 has gained 10.1%. Local yields continue to outshine those of global developed markets. The yield of 1.009% on the UK 10-year gilt, and 1.76% on the US benchmark 10-year treasury bond pales in comparison to the 8.76% yield on the R186 and 8.05% on the R207. Taken at face value, there is a lot favouring domestic bonds. What then is holding yields back from strengthening further?The main reason cited by analysts is political risk, as well as a potential sovereig...
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