South African government bonds strengthened on Wednesday afternoon, signalling a thumbs up to Malusi Gigaba’s budget speech. The finance minister outlined deep cuts in government spending while increasing personal income tax rates and value-added tax (VAT). The measures aim to stabilise the country’s finances, and thus hopefully dodge a credit-rating downgrade by Moody’s, which is set to deliver the results of its latest review on the country in the next few weeks. The yield on the benchmark R186 bond briefly fell below 8% for the first time since April 2015, according to Iress data, as the implied cost of government borrowing dropped.

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