Picture: ISTOCK
Picture: ISTOCK

South African bonds were largely unchanged at midday on Friday on a weaker rand and as US treasury yields rose on higher inflation data.

The US consumer price index (CPI) rose 0.4% month on month in August, with much of the gain owed to a sharp rise in petrol prices caused by Hurricane Harvey. On an annual basis, consumer inflation came in at 1.9%, just below the US Federal Reserve’s 2% target. Barclays Research analysts have predicted that consumer inflation could climb to 2.2% in September.

That raised expectations that interest rates could be hiked later this year.

"We maintain our view that a December rate hike remains on the table, but also point out that it is still dependent on incoming data on labour markets, activity and inflation," Barclays said.

However, the market remains unconvinced about this option as the dollar lost ground against the euro with added concern emanating from the Far East after North Korea fired another missile over Japan.

"The local bond market recorded net outflows on Thursday as the rand has come under sustained pressure over the past few sessions," Nedbank Corporate and Investment Banking (CIB) analysts noted.

At 11.30am the R186 was at 8.405% from 8.41% and the R207 was stable at 7.09%.

The rand was at R13.1956 to the dollar from R13.1166.

Foreign buyers were net buyers of local bonds last week as local institutions stood on the sidelines.

The US 10-year was at 2.1946% from 2.1858%.

UK gilts continued their weakening trend with the UK 10-year at 1.2929% from 1.2291%, after the Bank of England’s decidedly hawkish message on Thursday, which led to the pound’s strengthening against the dollar.

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