Bonds lose ground in line with jittery rand after public protector’s statement
South African bonds weakened on Monday afternoon in line with the rand, which in turn, was affected by local political concerns.
A weaker rand has the potential to stoke inflation, which would render local bonds less appealing on a real-returns perspective.
At 4.08pm the benchmark R186 bond was bid at 8.55%, from 8.47% on Thursday, as the rand weakened as much as 2% to the dollar after Public Protector Busisiwe Mkhwebane recommended changes to the mandate of the Reserve Bank.
She wants the Constitution to be amended to ensure that the mandate of the Bank promotes economic growth and not only protects the value of the rand exchange rate.
"Either the leadership doesn’t care about international opinion, ratings and the currency or there is a more sinister underlying motive," said Ashley Dickinson, head of fixed-income dealing at Sasfin Securities.
"Either way, it just demonstrates the total lack of regard for the progress made by the pragmatic faction and how fragile our markets actually are."
Ratings agencies have previously cited the independence of the Reserve Bank as one of the institutional strengths that counts in the country’s favour.
The rand was last at R12.9572 to the dollar from R12.7844.
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