South African bonds weakened on Thursday afternoon, despite Reserve Bank governor Lesetja Kganyago’s announcement that the repo rate will remain at 6.75%. Despite broad market expectations of a cut, Kganyago cited political risks, the prospect of further sovereign credit-ratings downgrades, and the possibility of high electricity tariff hikes, as reasons to keep the repo rate unchanged. "Given the heightened uncertainty, the monetary policy committee felt it would be appropriate to keep the monetary policy stance unchanged and re-assess the data at the next meeting," Kganyago said. Bonds weakened despite the decision, and the firmer rand, which bonds usually track. Higher interest rates tend to support bonds, as relatively higher yielding local bonds are attractive to investors. Government bond yields in most developed countries are currently at historically low levels. Kganyago, however, gave a hawkish view of risk to the rand, while analysts had warned of some volatility after the...
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