South African bonds firmed further on Thursday afternoon, giving a thumbs up to new President Cyril Ramaphosa, who committed himself to advance the interests of the country.

The yield on the benchmark R186 bond was at 8.255% in late trade, mirroring the stronger rand, which hovered at a three-year high to the dollar. The stronger rand acts as a buffer against inflation and could persuade the Reserve Bank to cut interest rates, which would benefit the bond market.

"The rand and South African bonds have traded weaker than fair value for most of the past two years as risk premiums were kept high by escalating political turmoil," said Anders Faergemann, senior sovereign portfolio manager at PineBridge Investments. "With Zuma’s departure, it opens the way for these divergences to be squeezed out."

Attention will now shift to the budget speech next week, which has the potential to move the markets. Ratings agency Moody’s is set to follow that event with the result of its latest review of SA’s credit rating.

It remains unclear at this stage if Moody’s will grant the country a stay of execution to allow Ramaphosa to put in place the required reforms to improve the economy.

Ramaphosa has hit the ground running since he became ANC leader in December, ringing in, among other things, fundamental changes at Eskom, which economists say remains a potential systemic risk to the economy. He has also vowed to restore the integrity of the country’s law-enforcement agencies, which took strain under Zuma.

The rand was last at R11.66 to the dollar, after earlier reaching R11.59.

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