Equity market uncertainty and declining inflation have improved the outlook for domestic bonds, which look attractive going into 2017, says Eben Maré, head of fixed income at Absa Asset Management. An 8.9% yield on the 10-year government bond (the R186) was relatively high and offered attractive real returns. However, Maré said, debt markets were still exposed to the risk of a possible sovereign credit downgrade to junk status, although given the more positive outlook for global growth and commodity prices, SA could escape this outcome. David Knee, chief investment officer at Prudential Investment Managers, said: "South African bonds are cheap compared with their long-term fair value and offer good prospective returns." Bonds had rallied in 2016, but returns were volatile, in part because of swings in the rand, said James Turp, portfolio manager for fixed income at Absa Asset Management. "Bonds have been the best-performing local asset class with a 15% year-to-date return. The loomi...
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