Bonds slip as the market reacts to lower rand and higher consumer inflation
South African bonds were weaker in late afternoon trade on Wednesday, as the market followed the softer rand on higher-than-expected consumer price inflation. The consumer price index (CPI) for December came in at 6.8% from a corresponding annual rate of 6.6% in November. Expectations were for 6.5%. At 3.35pm the R186 was bid at 8.680% from 8.640% and the R207 was at 7.960% from 7.920. Higher inflation usually results in higher interest rates, but in this case the Reserve Bank’s monetary policy committee (MPC) was likely to pause at its first meeting for 2017 next week, as CPI is expected to return to within the Bank’s 3%-6% target in the second quarter. Local bonds were also following weaker US treasuries in anticipation of a speech by US Federal Reserve chairperson Janet Yellen later in the day, after the JSE’s closure. The market is, at present, geared for three interest-rate increases in the US this year. The yield on the benchmark 10-year US bond was at 2.3740% from 2.3211%. Th...
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