Bonds marginally weaker before state of the nation address
Political risk premium is keeping long-term rates elevated, Rand Merchant Bank analyst Gordon Kerr says
The bond market was marginally weaker on Tuesday afternoon with the local market now focused on Thursday’s state of the nation address. Political risk has increased on rumours that President Jacob Zuma might reshuffle the Cabinet. The local currency was also weaker, at R13.4590/$, also vulnerable to the address. It rallied to the R13.20s level in the past week despite local and international political risks. Bonds, which usually track the rand, failed to keep pace with the currency’s momentum, with the best bid on the R186 at 8.810% yesterday. Rand Merchant Bank analyst Gordon Kerr said political risk premium was keeping long-term rates elevated, and this would unwind only after the address and the potential Cabinet reshuffle was out the way. At 3.25pm the bid on the benchmark R186 bond was 8.850% from 8.810% on Monday. The bid on the R207 was at 7.975% from 7.930%.
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