Picture: ISTOCK
Picture: ISTOCK

South African bonds were a lot stronger Thursday morning, after Jacob Zuma stepped down as head of state, removing a cloud that hung over local market.

The yield on the benchmark R186 bond was at 8.34% in early trade from 8.40%, mirroring a stronger rand that was 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, considered a boon for the bond market.

"We should test lower [stronger] this morning on the big news but again much of the good news is already in the price and a difficult budget as well as a possible downgrade still lie ahead," said Deon Kohlmeyer, analyst at Rand Merchant Bank.

Moody’s is set to deliver its ratings review on SA shortly after the budget, which Finance Minister Malusi Gigaba is meant to deliver next week.

Moody’s is the only major ratings agency that still has the country’s credit rating at investment grade.

It remains unclear at this stage if Moody’s will grant the country stay of execution to allow soon-to-be sworn in president Cyril Ramaphosa to put in place to reforms to improve the economy.

Ramaphosa has hit the ground running since he became the ANC leader in December, ringing in fundamental changes at Eskom, which economists said posed potential systemic risks to the economy.

He has also vowed to restore the integrity of the law enforcement agencies that took strain under Zuma’s tenure.